Information exchanges between competitors is a highly topical issue under EU competition law. The recent judgment of the Court of Justice of the EU (CJEU), the highest EU court, confirmed its significance when it recently ruled that a bilateral exchange between banana importers of pre-pricing information relating to the weekly quotation prices for bananas amounted to a concerted practice with the object of restricting competition under Article 101 the Treaty on the Functioning of the European Union (TFEU) (Case C-286/13P). This ruling elaborates on the concept of the “by object” restriction standard of illegality with regards to information exchanges among competitors.
Information Sharing Under EU Competition Law
The fundamental premise of EU competition law is that every undertaking must independently determine its intended pricing policy. Companies therefore are strictly precluded from having direct and indirect contact that may influence the pricing conduct of its actual or potential competitors.1 Article 101 TFEU prohibits concerted practices which by way of object or effect restrict competition. A concerted practice is any form of coordination that substantially reduces uncertainty as to the type of conduct competitors can expect on the market.2 There is a general presumption that companies that participate in concerted practices involving prices take into account any pricing information exchanged with their competitors when determining their own pricing in the market.3 Such information sharing between competitors is thus a high risk practice in the EU, because the law on pricing information exchange is stringent and often stricter than the law in many non-EU jurisdictions. The application of Article 101 TFEU is expansive and applies to information exchanges in contexts that have either an anti-competitive effect or an anti-competitive object.
Information exchanges that involve individualized intentions concerning future prices or “quantities” (e.g. future sales or market shares) are considered restrictions to competition by object.4 This means that once the European Commission (EC) has determined that an information exchange constitutes an infringement by object, it is generally not required to analyze the actual effects the information exchange has on the market. The CJEU determined in the Cartes Bancairescase, however, that it is necessary to examine the proper context in which the conduct of a by object restriction arises in order to determine whether the coordination, by its nature, is harmful to the proper functioning of normal competition.5
Banana Cartel Case
The CJEU’s judgment in the banana cartel case is a stark reminder of the long reach of EU competition law regarding the exchange of information between competitors. The case arose out of an investigation by the EC on the conduct of certain banana suppliers between 2000 and 2002. According to the EC the banana importers had engaged in anti-competitive discussions that entailed: (i) factors relevant to quotation prices (ii) price trends and (iii) share indicators of upcoming quotation prices.
The CJEU determined that there is a rebuttable presumption that companies that participate in price information exchanges and remain active on the market will use any commercially sensitive information shared between competitors to determine their market conduct.6 The CJEU thus upheld the decision of the General Court declaring that the exchange of pricing information among banana suppliers violated Article 101, and further noted that the information exchanged on quotation prices was relevant to the market, as it acted as a market signal for the intended development of actual banana prices. This means that in order to find that a concerted practice has an anti-competitive object, there does not need to be a direct link between that practice and consumer prices.7 Furthermore, the employees that were involved in the pre-pricing communications were also active in the meetings of competitors on internal pricing.8 The CJEU once again determined that an information exchange between competitors that reduces the degree of uncertainty of the operation of the market in question is prohibited.9 The CJEU’s ruling confirms that the concept of competitively sensitive information is not limited to actual pricing information or quantities, but can also include pricing factors.
The CJEU’s ruling in the banana cartel case confirms that pricing information exchanges between competitors is a high risk area under EU competition law. Before exchanging any competitive information with a competitor, a company should carefully consider the potential implications of such communications under Article 101 TFEU. As a general rule parties should never share competitively sensitive information (such as pricing strategies, growth strategies, strategic plans, market strategy or customer information). Competition authorities within the EU have increased the constraints and focus on anti-competitive information exchanges. Companies should therefore adopt stringent compliance programs to ensure that all employees are aware of the risks associated with information exchanges involving pricing or any other competitive matters.
Jacomijn Christ and Maxime van den Dijssel of the Amsterdam office contributed to this article.