1 August 2009

A single meeting may be one too many

A recent decision of the European Court of Justice (ECJ) in T-Mobile Nl v Nma (C-8/08) has held that a single meeting between competitors is enough to constitute a "concerted practice" in contravention of competition law.

On a single occasion in 2001, representatives of five Dutch mobile network operators met and informed each other of, inter alia, the reduction of standard dealer remunerations for postpaid subscriptions, which was to take effect on a specified date. The Netherlands Competition Authority (NCA) found that the operators had thereby engaged in a "concerted practice" in contravention of Dutch competition legislation. Having made this finding, the NCA imposed fines on the operators for cartel behaviour.

The NCA's decision was appealed to the Dutch Administrative Court for Trade and Industry, which considered the provision in Dutch competition law to be similar to Article 81(1) of the EC Treaty (European law) and opted to stay the proceedings to request a preliminary ruling from the ECJ on specific points central to the determination of the case.

In its decision, the ECJ upheld its previous finding that firms are guilty of engaging in a "concerted practice" when there is a form of coordination between these firms, which the coordinating firms knowingly substitute for the risks of competition without having reached the stage of a properly concluded agreement. In South Africa, concerted practice is defined as "co-operative or co-ordinated conduct between firms, achieved through direct or indirect contact, that replace their independent action, but which does not amount to an agreement". Arguably, our definition of concerted practice is not too dissimilar to the European position.

In its ruling, the ECJ confirms the position that firms involved in a concerted practice are presumed to have taken account of the sensitive information exchanged with their competitors in determining their conduct in that market, unless the firms in question can show evidence to the contrary. Following on from this, the ECJ was asked to determine whether this presumption of a causal connection applies even if the concerted practice relates to an isolated event or whether it applies only to those circumstances where the concerted practice has taken place regularly over a period.

The ECJ unequivocally states that a meeting on a single occasion between competitors may be sufficient for participating firms to align their market conduct. The Court adds that the number of meetings held is not as important as whether the meeting/s afford competitors the opportunity to take account of the information exchanged in order to determine their conduct in the relevant market and knowingly substitute practical cooperation between them for the risks of competition.

Although European law differs in certain respects to SA law, this decision is likely to have some impact on the approach adopted by our competition authorities when considering the consequences and impact of an exchange of confidential information by competitors. Competitors who meet, even once, perhaps at a trade association meeting, must be extremely careful to avoid discussing competitively sensitive information to prevent a possible contravention of the law.

Pia Harvey,
Senior Associate, Competition

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