With a musical ABBA twist, Johan Ysewyn presented the evolution of the cartel concept in the EU at the Chillin’ Competition Conference on 20 November 2018 in Brussels.
Click here to watch the full presentation by Johan.
A short history
Knowing me, Knowing you – the traditional cartels of the 90’s and early 2000’s took the form of direct, horizontal contact between independent competitors agreeing, sometimes with the help of facilitators, a common course of conduct, typically focusing on price. But competition authorities have been pushing these concepts, finding an increasingly wide range of cartel behaviour: hub and spoke cartels, purchasing cartels, innovation cartels, tacit collusion, and now, the new algorithmic collusion question. Innovate or die!
Johan gave two examples :
- The Man in the Middle – Hub-and-Spoke cartels see a party in a vertical relationship facilitate coordination between two or more horizontal competitors (A-B-C exchange). Here, however, the clarity ends. It is unclear, amongst other things, exactly what is the standard of proof. More significantly, it is unclear who needs to know exactly what will happen to information that is passed on, what the information is used for, and whether there needs to be reciprocity in Hub-and-Spoke exchanges. The criteria set out in the UK’s Replica Kits are no longer consistently used by competition authorities who are starting to confuse the concept with facilitation.
- Signalling through price announcements. The publication of prices and other information is widespread but at what time does that become a signalling mechanism to facilitate coordination between competitors? Again, the analytical parameters are unclear. For example – the EU Container Shipping investigation, where the European Commission alleged that price announcements facilitated coordination but the factors to which the Commission pointed – similar timing of announcements, similar rate of price increases, adjustments in prices if competitors do not follow – can be equally representative of normal commercial behaviour.
What is the problem?
The problem has been the legal uncertainty that has resulted from the Commission’s use of the “by object” criteria to characterise behaviour. Companies are reluctant to drag out the investigative phase by challenging an expansive definition of what constitutes a cartel. This leads to a process of de facto law-making through settlement and commitment decisions, which strips some rigour from the definition of the concept of the cartel. Conceptual uncertainty leads to over-compliance, which stifles efficiency-enhancing behaviour and generates confusion over the scope and application of immunity programmes.
Conclusion – back to basics
To remedy a continuing evolution that sees the concept of the cartel become more and more obscure, going back to basics is essential. This means a return to the core of cartelization: horizontal agreements between competitors, direct contact (or contact through a facilitator), agreement on a common course of conduct to replace competition, and a focus on price or similarly central strategic parameters. Keeping to these basics would ensure a transparent enforcement framework with requisite legal certainty, and avoid conceptual confusion and efficiency-stifling over-compliance.