Competition authorities are increasingly targeting and penalising exchanges of information that violate competition law. The Federal Cartel Office (FCO) deems exchanges of information between competing manufacturers regarding the status of proceedings in the context of annual meetings with retailers to be a severe violation of competition law. Recently, for the third time since 2008, the FCO imposed fines for such offences. The previous fines imposed were €19 million against brand name manufacturers of drug store articles and their distribution managers (in 2008), and €30 million against three manufacturers of consumer goods (in 2011).
In its recent action the FCO imposed a fine of €2.4 million on confectioner Haribo and its employees for prohibited exchange of information relevant to competition.(1) According to the FCO's findings, high-ranking sales employees from four sweet manufacturers met regularly for informal talks in 2006 and 2007. They discussed the status and course of negotiations with various major retailers. They also revealed demands for rebates, as well as how the companies had reacted and intended to react to these demands.
Such an exchange of information constituted a violation of the prohibition on cartels. By speaking only to each other, the companies did not explicitly restrict their competitive freedom, since each participant was formally still free to decide how to behave in competition. However, a restriction of competition through concerted behaviour also occurs if an exchange of information between competitors reduces or omits uncertainty about occurrences on the market. The information exchanged between Haribo and its competitors was sufficient to influence the conduct of those companies on the market in negotiations with traders.
Not every exchange of experience or opinions between competitors is prohibited under competition law; indeed, such exchanges can stimulate competition. This has been acknowledged by the competition authorities. For example, the new Horizontal Guidelines of the European Commission state that the exchange of information is a common feature of several competitive markets and leads to different types of efficiency.(2) First, markets can be made more efficient by correcting information asymmetries. Companies can also improve their internal efficiency by benchmarking against each other's best practices.(3) Another section of these guidelines acknowledges that collecting and publishing market data through trade organisations is useful: "This activity could benefit suppliers and customers alike by allowing them to get a clearer picture of the economic situation of a sector and thus make better-informed individual choices."(4)
However, in the foreground is the risk posed to competition. Whenever an exchange of information may give companies insight into their competitors' market strategies, a restriction of competition may result.(5) Whether this is the case depends on the characteristics of the market concerned and on the type of information exchanged. If information were exchanged in a tight oligopoly, this would lead to impermissible coordination more so than in a market with many players.
With respect to the type of information exchanged, the question is whether competitors exchange data that reduces strategic uncertainty on the market, which is not only the case with prices. In contrast, data which is not current or specific enough to draw conclusions about competitors' behaviour has no strategic value. If data is collected in a manner so that it cannot be allocated to an individual company, it also has no strategic value. Market coverage and the frequency of the exchanges of information are further criteria, as well as whether the information is public information and whether the exchange is carried out publicly, privately or conspiratively.
Special attention must be paid when an information exchange has not only anti-competitive effects, but also the restriction of competition as its object; fines can be expected for such violations. In practice, three cases are considered intentional restrictions of competition:
- The exchange of information is part of a comprehensive agreement and is intended to support, facilitate or monitor price fixing, quotas, territorial agreements or other concerted behaviour. Such an exchange of information is deemed collusive, as it has no function in itself, but is only part of a cartel.
- If companies inform each other about intentions to increase prices, such an exchange of information has a purpose which restricts competition.
- Parties may exchange other strategically significant information on future market behaviour. The Horizontal Guidelines include as examples of this information on future sales, market shares, territories and sales to particular group of consumers.(6) In the FCO's view, this category also includes the exchange information on the status and the process of annual discussions with retailers.
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