The European Court of Justice (ECJ) has ruled that a single meeting between companies may constitute a concerted practice in breach of competition law. In particular, the ECJ assumes that, if anti-competitive behaviour takes place (in this case illegal information exchange), that behaviour is capable of having an effect on the market even after only one meeting as the participants are assumed to take account of the information they have received.
By way of background, representatives from five mobile telephone network operators in the Netherlands (Ben Nederland BV (now T-Mobile), KPN, Dutchtone NV (now Orange), Libertel-Vodafone NV (now Vodafone) and Telfort Mobile BV (subsequently O2 (Netherlands) BV and now Telfort)) held a meeting on 13 June 2001. At that meeting they are alleged to have discussed, amongst other things, the reduction of remunerations for subscriptions.
The Dutch competition authority found, in 2002, that the five operators had concluded an agreement with each other or had entered into a concerted practice, contrary to competition law: in particular, that they had conspired to reduce their respective payments to mobile phone dealers. The case was appealed and the Administrative Court for Trade and Industry in the Netherlands referred the case to the ECJ, requesting the ECJ to clarify certain legal issues, in particular, whether a single meeting is sufficient to form the basis of a concerted practice in breach of competition law.
The ECJ held that, depending on the structure of the market, it could not be ruled out that a meeting on a single occasion between competitors could constitute a sufficient basis for the parties to coordinate their market conduct. The Court observed that what matters is not the number of meetings (nor indeed whether the meetings involve direct discussion of retail prices) but rather whether the meeting/s which took place provided an opportunity for competitors to take account of information exchanged between them in order to determine their conduct on the market. The ECJ said that there is a presumption that when companies exchange information concerning intended conduct, they will take that information into account in their future conduct (and therefore the burden of proof is on the companies involved to rebut that presumption).
The case will now be referred back to the Dutch courts for a final ruling.
The judgment is of considerable practical importance, as it illustrates that the threshold for an infringement is low: the ECJ has essentially confirmed that even a one-off exchange of commercially sensitive information between competitors is problematic, as it removes the uncertainty of market conditions and leads to coordination of their competitive behaviour/conduct and alignment of business strategies.
This does not mean that companies should avoid attending all meetings at which competitors will be present. However, the risk is that such meetings give rise to an anti-competitive agreement and the case therefore serves as a useful reminder that a company must ensure that when it does attend meetings with competitors, it does so in full compliance with competition law (in particular, a company should ensure that any employees attending such meetings have received some guidance – ideally in the form of competition law compliance training – to ensure they understand the requirements of competition law (for example, what are the key do’s and don’ts, what types of behaviour/discussions at meetings are likely to be unlawful, how to react) and therefore reduce the risk of any breach).
The reason this is important is because breach of the competition rules can have significant implications, for example:
- fines for companies (of up to 10% of a company’s (or trade association’s) group turnover);
- damages actions for loss suffered by third parties as a result of anti-competitive behaviour;
- individuals dishonestly involved in certain “hardcore” cartel behaviour can be fined and/or go to jail and/or be disqualified from acting as a director;
- (time consuming and costly) investigations (in circumstances where regulators have very broad powers of investigation) and therefore also negative PR and potential loss of shareholder value.