A number of Japanese businesses have expressed interest in a newspaper article that appeared in the Nihon Keizai Shimbun on Saturday 4 September. The article reported that the European Commission plans to increase restrictions on exchanges of information between competitors under its revised guidelines on horizontal agreements. In particular, the article stated that under the draft revised guidelines, information exchanges between competitors may be prohibited even where the information is already publicly available, or where the information is exchanged through third parties.
Japanese companies doing business in the EU should be aware that the draft revised guidelines do not represent a significant departure from existing EU competition law. This bulletin clarifies the current EU rules in relation to information exchanges, and briefly explains the implications of the draft revised guidelines.
The Commission's current guidelines on horizontal agreements date back to 2001. The feedback to the Commission's public consultation in 2008/2009 on the functioning of the rules showed that whilst the regime worked well, there was a need to update the guidelines and clarify further the rules in certain complex areas. The new draft horizontal guidelines therefore aim to summarise in one place existing practice as well as clarify the Commission's approach to certain forms of horizontal cooperation such as information exchange and standardisation.
The new draft guidelines were published on 4 May 2010 and were subjected to a wide public consultation. The Commission is currently reviewing all comments received and the final guidelines may differ from the draft reported on in the Nikkei article. It is currently expected that the new guidelines will be published later this year and come into force in January 2011. Whilst the Commission is in practice bound to apply its own guidelines for the sake of legal certainty, the guidelines are not binding on the European courts.
The current guidelines do not expressly refer to information exchange, but European case law and past Commission decisional practice make clear that information exchanges may infringe Article 101 of the Treaty on the Functioning of the European Union (TFEU). Where the information exchange concerns future prices or quantities, it will generally be considered as tantamount to cartel activity. The exchange of other types of information, whilst not amounting to cartel activity, may also bring about anticompetitive effects. Information exchange very easily leads to concerted practices, i.e. a situation where, without reaching an agreement, practical cooperation between competitors is substituted for the risks of competition.
The Commission recognises that in certain circumstances the exchange of information may be pro-competitive and efficiency enhancing. Ultimately, therefore, any anti-competitive effects have to be balanced in the Commission's analysis with the potential pro-competitive effects brought about by the information exchange.
To this end, a case-by-case assessment is always necessary. The competitive outcome of information exchange depends on (i) the characteristics of the market (such as the concentration of the market, transparency, stability or complexity); and, (ii) the type of information exchanged. The key question for companies to ask in respect of the information they wish to exchange is how that exchange of information changes the parameters of competition (i.e. price, output, product, quality, product variety or innovation). Companies themselves are the best arbitrators in the sense that they will know whether the information they are exchanging is likely to change their competitive behaviour.
In terms of the nature of the information in question, the new draft guidelines state that even the exchange of public information can fall foul of Article 101 if, for example, it would be difficult or more expensive for companies unaffiliated with the information exchange (competitors and/or customers) to compile the same information. This is somewhat consistent with existing case law. In the Atlantic Container Liner (TACA) case of 2003, the General Court stated that if the information exchanged is "in the public domain", the direct exchange of such information cannot constitute a breach of Article 101 (in this case the information in question was published on a government website). The courts have not, however, to date defined conclusively what is meant by information "in the public domain" in this context. Other case law suggests that instances where the parties have exchanged information, even though it was obtainable from customers, may be anticompetitive if it allows the participants to become aware of that information more simply, rapidly and directly than they would via the market. As such, the availability of the information from customers does not justify the direct exchange and would not be considered as information in the public domain. In this respect, the wording of the current draft leaves much to be desired and there has been much criticism of the draft in this respect as it seems to go further than current case law suggests and appears, on the face of it, too restrictive. The debate on when the information becomes public in the sense that its direct exchange no longer infringes Article 101 is not new but this is the first time the Commission has attempted to define it.
There is also a difference between public and non-public exchange of information. If information is exchanged in a way that it is equally accessible to all competitors and buyers, this public exchange may decrease the likelihood of a collusive outcome on the market (but this will depend on the characteristics of the market). Therefore, unilaterally gathering public information on one's competitors that is available to all generally tends to be unproblematic.
Similarly, it is also already the case that exchanging information indirectly through third parties will be prohibited if the effect of exchanging through third parties is the same as exchanging such information directly (for example through market research organizations or through the parties' customers and suppliers).
In summary, in many respects the draft guidelines do not depart from existing law in respect of information exchanges: rather, they codify and clarify the current situation. That being said, some of the clarifications, in particular in respect of "public information", have attracted great criticism for appearing to go further than before or being inconsistent with existing case law. These discrepancies will hopefully be addressed before the final guidelines are published.
Herbert Smith will continue to monitor and report on developments in the revised horizontal guidelines that may be of interest to Japanese companies.
Akzo Nobel Case
On 14 September the European Court of Justice handed down its judgment in the long-awaited Akzo Nobel case. As anticipated, the Court confirmed that legal professional privilege does not attach to communications with a company's in-house counsel for the purposes of EU competition law.
The case also confirmed that presumed parent companies can be held liable for the actions of a subsidiary.
A fuller update on this judgment will be circulated soon.