Price Signalling: Does the Commission's position in the Liner Shipping case deviate from existing case law?

While public price announcements are common commercial practice in many markets, such announcements may be challenged as illegal price signalling if they have the object or effect of restricting competition among suppliers. The question remains, however, whether such announcements are unilateral actions or concerted practices, as only concerted practices are subject to Article 101 TFEU.

According to the press release which the European Commission published in the Liner Shipping case (see above), the Commission considers that these public price announcements may constitute concerted practices allowing the companies to coordinate their behaviour by enabling them to "test" whether they could implement a price increase reasonably without incurring the risk of losing customers. Further, the Commission considers that the public price announcements made by the liner shipping companies had little value for consumers as these price announcements did not indicate the fixed final price for the services concerned, but only the amount of the increase.

The most relevant proposed commitments are the following:

  • the parties have offered to stop publishing and communicating price announcements, i.e., changes to prices expressed solely as the amount or percentage of the increase;
  • in order for customers to be able to understand and rely on price announcements, the price figures that the carriers announce will benefit from further transparency and include at least the five main elements of the total price (i.e., base rate, bunker charges, security charges, terminal handling charges and peak season charges if applicable);
  • any future announcements will be binding on the carriers as maximum prices for the announced period of validity (but carriers will remain free to offer prices below these ceilings); and
  • price announcements will not be made more than 31 days before their entry into force, which is usually when customers start booking in significant volumes.

The commitments would apply for a period of three years.

The Commission's approach is noteworthy mainly because it may deviate from the reasoning espoused by the Court of Justice of the European Union ("ECJ") in the Wood Pulp judgment (Case C-85/89, Ahlström osakeyhtiö and others v. Commission). In that case, the Commission had levied fines on several wood pulp producers for engaging in concerted practices by announcing prices publicly on a quarterly basis to customers in the European Union. However, on appeal, the ECJ found that the system of quarterly price announcements did not, of itself, breach EU competition rules nor did it constitute evidence of collusion.

Bank Guarantees: Further clarifications from the EU Courts

When a company is fined by the Commission for breaching competition rules, that company usually has three months to pay the fine, after which the Commission is entitled to charge default interest. If the decision is appealed, payment will be suspended pending the appeal against the provision of a bank guarantee, in which case default interest is applied at a rate lower than that applicable for non-payment.

The order of the EU General Court ("GC") in the Retail Food Packaging cartel case and the judgment of the Court of Justice of the European Union ("ECJ") in the Animal Feed Phosphates cartel case clarify conditions for the posting of bank guarantees, in particular where a company is in a dire financial condition and where a "AA" rated bank guarantee may not be available.

With respect to the Retail Food Packaging cartel decision, the Commission had indicated that the payment of the fine had to be made within three months from the date of the notification of the decision, after which interest was automatically due at the BCE rate (0.5%), increased by 3.5%. In the event of an appeal, the undertaking had to either pay the amount of the fine, or provide the Commission with a bank guarantee. If a bank guarantee was provided, then the interest rate to be paid by the undertaking on the fine was lower, i.e., the BCE rate (0.5%), increased by 1.5%. However, because CCPL was unable to pay the fine and unable to secure a bank guarantee in view of its dire financial situation, CCPL submitted an application to the GC for interim measures seeking to suspend its obligation to provide a bank guarantee as collateral to paying the fines.

In its order, the GC exceptionally suspended CCPL's requirement to provide a bank guarantee on the grounds that: (i) it was sufficiently probable that the judge in the main proceedings would grant CCPL a reduction in fines imposed by the Commission; and (ii) it was impossible for CCPL to obtain a bank guarantee in view of its very difficult financial situation. Indeed, the GC noted that, despite requests made to 13 banks, CCPL was not able to secure a bank guarantee. However, the suspension was conditioned on two requirements, namely the payment of € 5 million as soon as practicable and the transmission to the Commission on a quarterly basis of detailed information on the implementation of its restructuring plan.

With respect to the Animal Feed Phosphates cartel decision, the parties involved in the cartel were informed under the terms of the Commission decision that they could pay the € 2.8 million fine in two instalments and benefit from a preferential interest rate if they provided a long-term "AA" bank guarantee. However, the Portuguese parties were unable to secure an "AA" rated bank guarantee because no Portuguese bank at the time could offer that rating, which led to the default payment interest rate (4.5%) being applied, resulting in more than € 36,000 of interest.

In its judgment, the ECJ overturned the judgment of the GC insofar as the GC had not carried out a fact assessment and an analysis of the discussions between the Commission and the parties as to the necessity and the proportionality of a bank guarantee requiring a "AA" rating. Importantly, the ECJ did not overturn the GC's judgment on the merits of the case, i.e., whether the "AA" rated bank guarantee was necessary and proportional, but instead overturned the GC's judgment on procedural grounds, i.e., the GC had not ruled on the parties' arguments relating to the communication of the justification of the "AA" rating. As a result, the ECJ referred the matter back to the GC.

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