In a recent opinion the advocate general concluded that collusion can arise among competitors in the e-commerce sector simply by one party failing to respond to an electronic notification.
Facts
The case concerned whether a simple measure implemented by the administrator of the Eturas computer reservation system (which was integrated into the websites of multiple travel agencies) could trigger a concerted practice among those agencies by imposing a maximum discount level.
The advocate general, transposing EU jurisprudence developed regarding physical cartel meetings to the online world, indicated that such measure could give rise to collusion.
Opinion
The advocate general was quick to distinguish the case at hand from cartel facilitation. In AC Treuhand the advocate general took the view that Article 101(1) of the Treaty on the Functioning of the European Union does not cover the responsibility of a pure consulting company which is not present on the relevant market or a related market. The advocate general differentiated the case at hand because Eturas was a contractual partner of all of the travel agencies concerned, having concluded licensing agreements with them, and it was also active on the market for licensing online booking systems, which was related to the travel agency market.
The advocate general observed in Paragraph 50 of the opinion that where the sender of illicit information is not a competitor but rather a third party, the interaction may give rise to horizontal collusion between competitors only if the addressee can be deemed to have appreciated that the information transmitted by the third party came from a competitor or at least was also communicated to a competitor.
The advocate general noted that where an undertaking receives information relating to an illicit initiative and does not oppose it, its acquiescence may be inferred from the lack of response, provided that the circumstances are propitious to the formation of a tacit consensus. This is consistent with T-Mobile, where the European Court of Justice held that although a one-off meeting can be enough to constitute a cartel affecting one parameter of competition, regular meetings over a long period may be necessary for a cartel which coordinates multiple aspects of market conduct.
The crux of the case at hand was whether users of the Eturas system could be presumed to have been aware of the August 2009 system notice. The advocate general observed that, on the one hand, the system administrator's notice was an unusual way of communicating and very unlike a meeting between competitors. On the other hand, the unusual method of communication was counterbalanced by other circumstances (including the fact that it was a clear horizontal communication which would be implemented by all parties in the absence of a reaction from recipients).
The advocate general observed that the public distancing defence must be adjusted for the realities of the e-commerce sector. It was clearly unreasonable to have required the company to express its opposition to all participants in the concerted practice (as it might not have been able to identify them). However, the company should have informed the system administrator of its dissatisfaction, as well as any other companies of which it was aware. The advocate general also emphasised that it was insufficient for the company to ignore the communication or to instruct its employees not to conform to the practice. It would also have been inadequate to oppose the practice by mere conduct on the market – for example, by giving individual discounts in order to counterbalance the general restriction. Without public opposition, such conduct could not easily be distinguished from mere cheating on other cartel members.
Comment
It could be questioned whether it is fair to treat companies that are linked together by a common IT system in the same way as companies that are represented by people physically present at a cartel meeting. Some of the agencies saw the Erturas system as insignificant, as it accounted for only 0.0025% of their total revenue. While traditional case law can be applied to the e-commerce sector, the 'lack of public opposition' argument is plausible only when information is shared at a meeting with competitors physically present.
If the advocate general's opinion is followed by the court, the implications will be far reaching. Companies should take care with their IT functions and any internet automation which controls pricing elements. This seems more likely in franchises and other internet-enabled networks.
The same issue has arisen in relation to vertical restraints/resale price maintenance. Some years ago the Greek competition authority fined Carrefour €12.5 million for resale price maintenance, largely due to an IT system which rendered the individual management of prices by the franchisees difficult and time consuming in practice. The case also follows a recent trend of alleged IT-related collusion. Most notably, the US Departement of Justice instigated enforcement proceedings against an individual who used pricing algorithms to coordinate the prices of posters and who wrote computer code instructing algorithm-based software to set prices in conformity with this. In that case, the algorithms implemented the collusion.
For further information on this topic please contact Bill Batchelor at Baker & McKenzie by telephone (+32 2 639 36 11) or email ([email protected]). The Baker & McKenzie website can be accessed at www.bakermckenzie.com.
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