United States: Beware Of Public Announcements! Recent European Competition Developments On Price Signalling

Forward public announcements of prices and outputs are common in many industries. The effect of such announcements on competition has traditionally been considered ambiguous.1 Partly for that reason, simple price announcements have been difficult for the agencies to attack under the antitrust rules in the absence of evidence of actual collusion. While there have been a few challenges in the US over the years, there is little precedent. However, recent action by the European Commission and some Member States appears designed to send a clear signal: agencies are prepared to be more aggressive about future pricing announcements. Hence, it may be wise to revisit the traditional compliance approach to public price statements on either side of the Atlantic.

Information Exchanges in EU Competition Law

A key feature of the European Commission's (the "Commission") 2010 reform of its rules for the assessment of cooperation agreements between competitors2 was a new chapter devoted to exchanges of information.3 While this new section had some merit in setting out the principles developed by the Commission and the European Courts over the years, it did not provide a safe harbour to the application of EU antitrust law to information exchanges and in some ways laid the foundations for a more interventionist approach.

In Europe, in order for information exchange alone to fall under the antitrust rules, it must amount to a "concerted practice." In the jargon, this means that "practical co-operation has knowingly replaced the usual risks of competition." In the Guidelines this is given further elaboration, whereby information that is exchanged and reduces the strategic uncertainty around future commercial policy (such as price) that a competitor would otherwise face, may amount to a concerted practice. This raises two questions. The first is whether information disclosure amounts to "exchange" at all. The second is about the type of information needed to reduce strategic uncertainty. Taking the first question, most firms making public announcements of strategic information would not consider themselves involved in information "exchange." They will usually consider the information has simply been disclosed to and for the benefit of customers and not "exchanged" in any meaningful sense with competitors. The Horizontal Guidelines, however, list three scenarios that amount to an exchange – each shows that the barrier is not high to show an "exchange" of information:

  • One party disclosing its future intentions to another when the latter requests it or, at the very least, accepts it;4
  • Mere attendance at a meeting where a company discloses strategic data;5
  • A meeting between competitors on a single occasion where they discuss commercially sensitive information.6

A scenario not listed however is a unilateral (i.e., individual) public announcement of future intentions. Can this amount to an exchange of information?

Can Public Unilateral Announcements Amount to an Exchange of Information?

The traditional view (repeated in the Horizontal Guidelines) is that where a company makes a unilateral announcement that is genuinely public,7 for example, through a newspaper, this generally does not constitute a concerted practice within the meaning of Article 101 TFEU. There are two quite narrow exceptions to this in the Horizontal Guidelines.8 Until recently neither of which was meaningfully exploited by the Commission.

Situations Where Unilateral Public Announcements Involve Invitations to Collude

Where a public statement involves an invitation to collude, the unilateral disclosure could amount to a concerted practice. While the Commission has yet to bring an enforcement action against a public invitation to collude, the facts in a challenge by the US Federal Trade Commission ("FTC") of certain public announcements by Valassis Communications illustrate the type of situation that it may cover.9 Several years ago, Valassis' CEO, who allegedly expected the company's major competitor to monitor his announcements, opened an earnings conference call by detailing the company's new strategy along the following lines: "Valassis will submit bids at a level substantially above current prices," "Valassis will seek to retain its current share [...] but not to encroach upon [its competitor]'s position," "Valassis will monitor [its competitor]'s response to this overture," etc. The FTC challenged this unilateral, public conduct on the basis that it was intended to facilitate collusion and lacked any legitimate business justification.10 To settle the challenge, Valassis agreed to refrain from this kind of public communications.

Situations Where Public Announcements by One Company are Followed by Public Announcements by Competitors

The pattern of announcements of one company being followed by competitors' announcements was first assessed by the Commission in Woodpulp. The facts were as follows: under a system of quarterly announcements, pulp producers communicated to their customers, some weeks or some days before the beginning of each quarter, the prices which they wished to obtain in the quarter in question. In its decision, the Commission condemned such practices: "[T]he system of quarterly announcements [...] constituted in itself, at the very least, an indirect exchange of information on future market conduct. [...] The fact that prices were published well in advance of their entry into effect at the beginning of a new quarter guaranteed that other producers had sufficient time to announce their own – corresponding – new prices before that quarter and to apply them from the beginning of that quarter."11

On appeal, the European Court of Justice overturned the Commission's decision. The Court held that the communications arose from price announcements made to customers. Price announcements did not constitute in themselves market behaviour which lessened each company's uncertainty as to the future attitude of its competitors because at the time each company engaged in these announcements, it could not be sure of the future conduct of the others.12

Despite the Court's position in Woodpulp, the Horizontal Guidelines left open the possibility that a Woodpulp type scenario could still amount to a concerted practice where a unilateral public announcement is followed by public announcements by other competitors. Therefore, the Commission remains concerned that the strategic responses of competitors to each other's public announcements could allow competitors to reach a common understanding about the terms of coordination. A recent case (see below) suggests that the Commission's ambition to attach antitrust liability to such behaviour remains undimmed.

What Type of Information Needs to Be Exchanged and When to Amount to a Concerted Practice?

Exchanges of information – including in the form of public announcements – regarding intended future prices or quantities amount to a restriction of competition by object.13 No actual anti-competitive effects need to be demonstrated where the agreement has a restriction of competition as its object.14 However, where companies announcing prices publicly are fully committed to sell in the future at the announced prices (that is to say that they cannot revise them), these announcements would be considered as simply prices – not pricing intentions – and hence would normally not be found to restrict competition by object.

Two recent cases illustrate this point:

  • The Dutch Authority for Consumers and Markets investigated into public announcements made by the three major mobile network operators (MNOs). The Authority held that the public statements, made by MNOs at conferences or in trade journals, about their future market behaviour, could create a risk of illegal coordination. This was particularly the case as the strategies communicated were not finalized. The authority argued that collusive behaviour could result from competitors taking note of these announcements and following such publicly-made statements. As a result, in order to avoid any risk of illegal collusive behaviour in the future, the three companies committed to refrain from making statements about "non-finalized" decisions.15
  • In its cement market investigation (not an Article 101 case), the UK Competition Commission (the "CC") analysed a number of letters by which suppliers informed their customers about their intentions to increase the price of products in the near future. Given that these increases were "aspirational" and did not reflect actual price increases, the CC concluded that such conducts restricted competition. An order will be issued, prohibiting suppliers from sending generic price announcement letters to their customers. In the future, price announcement letters would have to be specific and include, among others, the current price paid by the customer and the new unit price being proposed.16

The type of information therefore that can trigger a concerted practice allegation is most likely to relate to future price or output intentions.

The Commission's Ambition to Establish its Own Precedent

The Commission is currently pursuing a case where public announcements by one company were followed by public announcements by competitors. In November 2013, the Commission announced the opening of antitrust proceedings against a number of container shipping lines.17 The Commission is investigating whether, by making regular public announcements of general rate increases through press releases on their websites and in the specialized trade press, shipping companies engaged in information exchange that amounted to an illegal concerted practice. Despite the established Woodpulp case law, the Commission apparently believes that these practices may have allowed shipping companies to signal future price intentions to each other. More specifically, it appears that the Commission "expressed concerns about the length of time between the companies' price announcements and their actual implementation,"18 on the basis presumably that the gap created an opportunity for competitors to adapt themselves to the announced intentions. The Commission is likely to use informal settlement possibly in order to side step the constraints Woodpulp would pose for a formal decision. Nevertheless, informal settlement can establish a sort of "precedent" about the Commission's enforcement approach to "non-finalized" unilateral public pricing announcement. Were the Commission to settle this case in this way, it would signal yet further care is needed to re-assess such announcements to ensure that – ideally – they are above suspicion.

Lessons to Be Drawn

As companies can suffer serious consequences for breaches of EU (and US) antitrust laws – and even distracting and debilitating consequences from being subject to investigation – regardless of the outcome, the following "dos and don'ts" will help structure thinking about public unilateral announcements about future prices or output (statements on your website, publications in the press, generic letters to customers, etc.):

  • Don't communicate more information than is strictly necessary, particularly regarding future pricing or strategic plans.
  • Think whether your announcement could be construed as an invitation to collude.
  • Avoid naming specific competitors in announcements.
  • Consider carefully how far in advance of taking effect price and strategic announcements should be made.
  • Don't make announcements contingent on what competitors will do or how the industry or sector in general will react.
  • Think carefully before making public statements particularly about price in order to "test the market." Ideally finalize your decisions internally before announcing them.
  • If a competitor mentions your company in a public announcement regarding future pricing or strategy plans, contact your counsel to carefully consider your response.

Footnotes

1 Public price announcements may benefit customers by helping them to choose the offering which best corresponds to their needs whilst at the same time lowering their search costs. They may however also serve as a focal point for coordination.

2 This reform led to the publication of the Guidelines on the applicability of Article 101 [TFEU] to horizontal cooperation agreements [2011] OJ C 11/1 (the "Horizontal Guidelines").

3 When public price announcements are customary in an industry they will need to be characterised as an "exchange" of information in order for the antitrust rules to bite as discussed below.

4 Joined cases C-204/00 P and others, Aalborg Portland A/S and Others v Commission [2004] ECR I-123, para. 81-86.

5 Joined cases T-202/98 and others, Tate & Lyle and Others v Commission [2001] ECR II-2035, para. 54-67.

6 Case C-8/08, T-Mobile Netherlands and Others [2009] ECR I-4529, para. 58-62.

7 An information exchange is genuinely public if it makes the exchanged data equally accessible (in terms of costs of access) to all competitors and customers (Horizontal Guidelines, para. 94).

8 Horizontal Guidelines, para. 63.

9 Valassis Commc'ns, FTC File No. 051 0008 (Apr. 19, 2006); see also Matter of U-Haul Int'l and AMERCO, FTC File No. 081 0157 (Jul. 20, 2010), which involved both private and public announcements by U-Haul, although in challenging the conduct, the FTC did not make this distinction.

10 Importantly, the FTC challenged the conduct under Section 5 of the FTC Act, 15 U.S.C. § 45, which prohibits "unfair methods of competition", and which has no counterpart under EU law. Unlike Article 101 TFEU, Section 1 of the Sherman Act, 15 U.S.C. § 1, only reaches conduct that includes an agreement, and therefore does not reach invitations to collude.

11 Commission decision of 19 December 1984 relating to a proceeding under Article [101 TFEU] (IV/29.725 – Wood Pulp) [1985] OJ L 85/1.

12 Joined cases C-89/85, C-104/85, C-114/85, C-116/85, C-117/85 and C-125/85 to C-129/85, A. Ahlström Osakeyhtiö and others v Commission [1993] ECR I-1307, para. 64.

13 Horizontal Guidelines, para. 74. In other cases, the likely effects of an information exchange on competition must be analysed on a case-by-case basis, depending on both the economic conditions on the relevant markets and the characteristics of information exchanged (Horizontal Guidelines, para. 75).

14 Guidelines on the application of Article [101(3) TFEU] [2004] OJ C 101/97, para. 20.

15 Besluit ACM van 7 januari 2014, zaak 13.0612.53.

16 Competition Commission, Aggregates, cement and ready-mix concrete market investigation, final report, 14 January 2014.

17 "Antitrust: Commission opens proceedings against container liner shipping companies," IP/13/1144, 22 November 2013.

18 "EU seeks settlement offers in liner-shipping price-signalling probe," MLex, 7 March 2014.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Emails

From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

*** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.