3.3 Information exchanges as concerted practices restricting competition by object

3.3 Information exchanges as concerted practices restricting competition by object

3.3.1 Introduction

When assessing the information exchange, determining the type of exchange initially provides a framework for the evaluation. This section examines pure information exchanges, where the economic function lies in the exchange of information itself.(1) Camesasca and Schmidt (2011) pp.227-228. The question examined is under which circumstances pure information exchanges, as concerted practices, between liner shipping companies restrict competition by object.

Pure information exchanges can occur both directly between competitors, for instance through a meeting, and indirectly, through a third-party such as a trade association, or through public announcements (“signalling”). Container Shipping provides a recent example of pure information exchanges through signalling. All 14 liner shipping companies publicly announced their intended price increases.(2) Case AT.39850 Container Shipping paras.26-27. The main economic function, and commercial value, was the announcements themselves.

The legal test when considering ‘object-infringements’ is whether the information exchange is “capable of removing uncertainty between participants as regards the timing, extent and details of the modifications to be adopted” by competitors.(3) Case C‑286/13 P Dole (CJEU) para.122; See also Case AT.39850 Container Shipping para.50 One may identify certain characteristics highly relevant to that assessment. Theoretically, these may be categorised in an “inner” and “outer” layer. The former relates to the internal “nature” of the information exchange such as its degree of commercial sensitivity, its level of detail, its age, and whether the data is private or public. The latter concerns its external circumstances such as its frequency, public availability, and market coverage.(4) Gassler (2021) pp.11-14. Since each exchange must be analysed concretely, the totality of these characteristics is decisive.

3.3.2 Characteristics of the exchange

Most of the characteristics’ impact on competition depends to some extent on the market structure, which affects the premises for the functioning of competition.(5) Communication 2022/C164 paras.443-446. For example, in oligopolistic markets one may expect that less frequent exchanges of less detailed information are required to facilitate collusion. Oligopolies are characterised by a small number of sellers and many buyers,(6) Van Gerven and Varona (1994) p.576 footnote 5. as well as homogenous products, transparent markets, significant barriers of entry, and interdependence between producers.(7) Albors-Llorens (2006) p.852. The liner shipping market has certain oligopolistic features such as concentration on the supply side, considerable barriers of entry, multiple links between competitors and homogenous services. Such markets, with few competing carriers in a transparent market, potentially facilitates relatively better use of competitors’ information than in a fragmented and diversified market. Depending on the market structures, the difference between private and public exchanges can be critical. Private communication

Generally, information exchanged privately is likely to pose greater risk than public exchanges. One obvious concern is that private exchanges between competitors may have the objective of colluding and restricting competition. Conversely, public exchanges tend to promote the interest of parties unaffiliated with the information exchange system, making them less alarming.(8) Camesasca, Schmidt and Clancy (2010) pp.412-413.

Several cases finding a restriction by object concerned information exchanged privately. In the case Tate & Lyle, the GC assessed meetings between the competitors British Sugar and Tate & Lyle, where the former unilaterally disclosed its future prices on industrial sugar.(9) Case T-202/98 Tate & Lyle and Others v Commission (Tate & Lyle) paras.9-11. The GC concluded that the meetings’ purpose to coordinate pricing policies, restricting competition by object.(10) Ibid. paras.53 and 72. A similar approach was taken in T-Mobile, which concerned one meeting between the only five operators in the Dutch mobile telecom market. The competitors discussed reduction in a standard commission and the Court stated that conduct “such as that in the present case” pursued an anti-competitive object.(11) Case C‑8/08 T-Mobile paras.10 and 41-42. The case Bananas concerned bilateral information exchanges via telephone between two large banana producers. The exchanges included “pre-fixing information” of future quotation prices and were deemed to restrict competition by object,(12) Summary of Case COMP/39.188 Bananas paras.7-9. upheld on appeal by both the GC,(13) Case T-588/08 Dole (GC) paras.54 and 683. and the CJEU (referred to as “Dole”).(14) Case C-286/13 P Dole (CJEU) para.160.

Points of private contact between liner shipping companies, via meetings or shipping associations, are thus likely to spark the interest of competition authorities. Depending on the exchange’s context, authorities may be concerned that the parties pursue an anti-competitive agenda. For instance, when competitors meet in relation to a pooling agreement, the expressed objective may be to discuss and evaluate the cargo-pooling, but the meeting does provide a forum for them to discuss and collude on other competitive issues. However, safeguards such as independent brokers or lawyers present in the meeting, or by isolating the parts of the business involved in the cooperation, can mitigate such risks. Public signalling

Although public communication traditionally causes less competition concerns, recent development of signalling-cases illustrate that also unilateral announcements can be regarded as restrictions by object. Signalling on parameters of competition, be it prices, capacities, or operations, can inform both shippers and competing carriers. It may offer shippers predictability as to when, from where, and at what price they can send their cargo. Simultaneously, it enables competing carriers to track operations and developments of one’s commercial strategies, potentially facilitating collusion in an increasingly transparent market.(15) Foros & Hjelmeng (2021) pp.186-188. In a competitive market, one may expect price transparency to increase the competition on prices.(16) Case C-238/05 Asnef-Equifax v Ausbanc (Asnef-Equifax) para.58. However, the liner shipping market is far from perfectly competitive, so signalling must be examined with caution.

Commitment decisions such as the Dutch case KPN, the British case Cement and Container Shipping illustrate that also public announcements can restrict competition by object. KPN concerned three competing mobile operators’ announcements and interviews introducing “connecting fees” and increased prices. The competition authority referred to the “anti-competitive risks” of such announcements, namely collusion on increased prices.(17) Case 13.0612.53 KPN paras.37-38 and 45.

Cement concerned open letters concerning future prices from cement producers to their customers. The British Competition Commission ordered the parties to refrain from the conduct, as the likely effects of the generic announcements were increased prices for cement.(18) The Price Announcement Order 2016 paras.2 and 12.

Thus, public announcements, particularly concerning prices, can restrict competition by object. Container shipping illustrates that the assessment depends on the other characteristics of the exchange. Of particular interest is the temporal aspect of the shared information. Past, present, and future data

The most obvious way to reveal one’s future commercial strategies is by exchanging data concerning future intentions. One may also assume that exchanges regarding future intentions are more likely to “by their very nature […] being harmful to the proper functioning of normal competition”(19) Case C‑32/11 Allianz Hungária para.35. than for instance information on current or historic strategies.

In Container Shipping, the liner shipping companies announced their respective GRIs, intended to be implemented within the next 3 to 5 weeks.(20) Case AT.39850 Container Shipping para.27. Similarly, Tate & Lyle concerned unilateral disclosure of future price intentions,(21) Case T-202/98 Tate & Lyle para.10.T-Mobile concerned future intentions to reduce a standard commission,(22) Case C‑8/08 T-Mobile para.12. and Dole concerned pre-pricing information exchange regarding future quotations.(23) Case C-286/13 P - Dole (CJEU) para.14. Additionally, the case E-Books, information exchanges between competing publishers of e-books was treated as an ‘object’-infringement. The information involved the publishers’ future conduct and was aimed at raising retail prices of e-books.(24) Case AT.39847 E-Books paras.77 and 92.

Still, one cannot exclude that announcements of current and past conduct may fulfil the criterion, especially if the competing carriers can establish patterns or cycles at a competing carrier, which again can provide insight to its future conduct. Arguably, more recent information is more likely to reveal such future intentions. For example, a liner shipping company which announce its previous quarter’s price increases and costs, may reduce competitors’ uncertainty regarding its conduct in the next quarter.

One recent case, Forex – Sterling Lads, concerned a cartel of information exchanged in private and multilateral chatroom between 4 major banks which traded on the FX spot market. The information concerned the parties’ trading activities, current positions, and future intentions, and was meant to affect the competitive parameters of price and expert risk management. The practice was labelled as a cartel, restricting competition by object, and the Commission held that the exchange of “sensitive current and forward-looking information” was used to coordinate the competing traders’ conduct to their benefit.(25) Summary of Case AT.40135 Forex – Sterling Lads paras.11-15.

The decision’s summary does not distinguish between past and future information exchanged, which can support that also past and present information may restrict competition by object. Similarly, in the recent case Sony, the GC stated that under those circumstances “knowledge of past results was highly relevant information for competitors, both for monitoring purposes and with a view to future contracts.”(26) Case T‑762/15 Sony and Sony Electronics v Commission para.127. The New Horizontal Guidelines also acknowledge that whether information is considered “historic” and less likely to restrict competition

“depends on the specific characteristics of the relevant market, the frequency of purchase and sales negotiations in the industry, and the age of the information typically relied on in the industry.”(27) Communication 2022/C164 paras.430-431.

Thus, one cannot exclude that the exchange of past and current information may, under specific circumstances, restrict competition by object.

However, one may argue that the reasoning in Sony and the guidelines often requires in-depth analyses of the effects to uncover whether the historic and current data reveals competitors’ future conduct. Exchanges of current information is for instance recognised to potentially have restrictive effects on competition.(28) Ibid. para.431. The system of Art. 101 captures such conduct in the ‘by effect’-assessment, and when interpreting the ‘object’-alternative restrictively, present and historic information is arguably not covered. Strategic/sensitive data

Exchanging “strategic” information is essential to establish a concerted practice (see Section 2.3.3 supra). Naturally, these strategic aspects are relevant also when assessing whether the exchange restricts competition, as strategic and sensitive information is usually more “capable of removing uncertainty between participants as regards the timing, extent and details of the modifications to be adopted” by competitors on the market.(29) Case C‑286/13 P Dole (CJEU) para.122; See also Case AT.39850 Container Shipping para.50. Although Container Shipping limited the discussion to price increases, Section 2.3.3 supra illustrated that information regarding a variety of parameters in liner shipping may be viewed as “strategic.” Case law reveals that several of these parameters can restrict competition by object.

The case Cobelpa concerned information exchanges between competing manufacturers of printing paper and stationery. Involving mutual notification of price increases and reductions, discounts, rebates, and general terms of sales, supply and payment, the Commission held that

“the only possible explanation for the exchange of this information is again the desire to coordinate market strategies and to create conditions of competition diverging from normal market conditions, by replacing the risks of pricing competition by practical cooperation.”(30) Case 77/592/EEC Cobelpa para.29.

Cobelpa illustrates a broad approach to the price parameter, supporting that most aspects of the pricing policies can constitute an ‘object’-infringement.

The case Infineon Technologies concerned a cartel between sellers of smart card chips based on the exchange of commercially sensitive information. The GC found that in light of

“the economic factors characterising the market [the] exchange of sensitive information concerning their competitors’ strategic policies in terms of prices, capacity and technological development” constituted an infringement by object.(31) Case T‑758/14 Infineon Technologies v Commission (Infineon Technologies (GC)) paras.173-175. Upheld on appeal by the CJEU in Case C‑99/17 P paras.157-158.

Accordingly, a variety of strategic parameters may restrict competition by object, particularly exchanges concerning “strategic policies.”(32) Case T‑758/14 Infineon Technologies (GC) para.174. For the services provided in liner shipping, pricing policies (both freight rates and operational prices), transport capacities, and vessel performances are relevant examples. Depending on the other characteristics of the exchange, these parameters may provide insight to competitors’ future market conduct.

However, since the concept of “strategic policies” must be considered in light of “the economic factors characterising the market”,(33) Ibid. para.173. a contextual analysis is arguably required. Consequently, one must look to the liner shipping market for guidance, and it becomes essential how one defines the “relevant market” in each case. Arguably then, the analytical approach is necessary when considering cases of information exchanges. Although certain parameters such as sales prices and quality and quantity of services are generally deemed “strategic”, other parameters are sector-specific and may fall outside the scope if applying the orthodox approach, even if the exchange, by its nature, is deemed harmful to normal competition. Individualised v aggregated data

Generally, it is easier to reach a common understanding and to monitor the competitors’ potential deviations from the cooperation when the information exchanged is individualised, namely when the prices, capacities and geographic coverage by each competitor is identified.(34) Communication 2022/C164 para.429. When data is sufficiently aggregated, it may be less useful in collusion, even though it can provide insight to the market conditions.(35) Ibid.

Arguably, the level of detail is a characteristic more relevant for the ‘by effect’-assessments.(36) Gassler (2021) pp.205-206. However, the level of detail has been a central element also in ‘object’-infringements. Forex – Sterling Lads concerned individualised information as each trader’s recent activities, current positions, and future intentions were revealed.(37) Summary of Case AT.40135 Forex – Sterling Lads paras.13-14. In the case Fatty Acids (see Section 3.4.1 infra), a key aspect to the information sharing agreement was the quarterly exchange of each competitors’ respective quantities sold in the market.(38) Case IV/31.128 - Fatty Acids para.12. Also in Container Shipping, each liner shipping company’s GRIs provided individualised data of the intended price increases.(39) Case AT.39850 Container Shipping para.51.

The degree of aggregation required to restrict competition depends on the market structure. For instance, in a tight oligopoly, competitors may not need to know exactly which company deviated from the collusion in order to respond.(40) Communication 2022/C164 para.429. Although the liner shipping market in general cannot be categorised as an oligopoly, it has certain elements which lead to that even aggregated data under specific circumstances can be useful, particularly when only a few pools or alliances compete with each other on a route.

Although characteristics in the “inner layer” can provide substantial guidance as to whether the information is adequate to restrict competition by object, the external features of the exchange are equally important to facilitate collusion. Frequency

More frequent exchanges of information can increase the risks of collusion, facilitating that competitors more easily reach collusive outcomes, and enable them to better monitor each other.(41) Ibid. para.439. In Container Shipping, the Commission resonated that the concerted practice constitutes an object-infringement when it occurs “on a regular basis and over a long period.”(42) Case AT.39850 Container Shipping paras.35-36. The risk to competition must, however, be evaluated in light of the other characteristics and the structure of the market. In T-Mobile, for instance, the Court held that depending on the market structure, just one meeting exchanging information can be sufficient for competitors to align their conduct to the detriment of competition.(43) Case C-8/08 T-Mobile para.59.

Generally, less frequent exchanges are necessary to restrict competition in stable markets than in unstable markets.(44) Communication 2022/C164 para.439. Similarly, markets with oligopolistic features may require less frequent exchanges. The information exchanged in such environments may provide substantial insight to parameters of competition even if exchanged infrequently. The liner container market arguably has certain oligopolistic features, depending on the definition of the relevant market and the number of competitors on specific routes. For instance, markets where only two or three of the major liner alliances compete, likely require less frequent exchanges to attain collusion.

Thus, competing carriers arguably require less frequent exchanges of information to collude. The discussion highlights the importance of defining the relevant market, which, if not obviously restrictive, presumes some contextual considerations in line with the analytical approach. Regardless, exchanges occurring on a regular basis over a long period of time are more likely to restrict competition by object, as seen in Container Shipping. Lack of efficiencies produced

One final consideration is whether the information exchanges, considering all its characteristics, are likely to produce efficiencies externally, to the benefit of customers and consumers. Case law often considers the participants’ (in)ability to show plausible efficiencies arising from the exchange. In Generics, it was held that the conduct “cannot have any explanation other than the commercial interests [… of the parties] to not engage in competition.”(45) Case C-307/18 Generics para.87.

In Tate & Lyle and T-Mobile, there were no apparent reasons for why future pricing information or production costs would increase effective production nor produce efficiencies. In Dole, it was unclear whether the exchange of price-related information would improve the competitors’ predictions of future demand. In E-Books, negotiations between the publishers lead to a higher-price distribution model rather than a lower-price model, clearly not benefiting customers.(46) Gassler (2021) p.200.

Furthermore, the case Asnef-Equifax concerned an information exchange system on debtor information, meant to provide solvency and credit information relating to the risks of providing credit. Financial institutions would be provided with both negative and positive information regarding customers’ history of credit balances, securities, and defaults. The Court emphasised that the exchanges could improve lenders’ information, remove information asymmetry, and thus improve the functioning of the lending market. Consequently, the practice was found not to have by its nature, the object of restricting competition.(47) Case C-238/05 Asnef-Equifax paras.46-48.

Following this rationale, an exchange of information which is plausible to produce efficiency gains, such as improving the functioning of the market, is less likely to be categorised as an object-infringement.(48) Ibáñez Colomo & Lamadrid (2016) p.26. Some plausible efficiencies are obvious when considering the cooperation, such as capacity cooperation between carriers resulting in more optimal usage of ships’ cargo space. Others are less intuitive and require considerable analysis of the cooperation and its effect on the market. For instance, the pooling of ships, which in practice reduces the number of independent competitors, can actually increase competition on certain routes because the scale of the demand far exceeds most independent carriers, making them unable to bid individually. One may argue that the economic and legal context must be addressed to reveal the cooperation’s actual effects, and that the analytical approach is required. However, the referred case law looks to the basic functions of the conduct to identify efficiencies, which supports that an orthodox approach is sufficient. Additionally, one may argue that if the efficiencies are not easily identifiable, the conduct is more suited for the ‘by effect’-assessment, supporting the orthodox approach.

Liner Shipping companies will argue that most public announcements and agreements, as pooling or consortia, produce efficiencies to the benefit of shippers and consumers. Cooperating on joint operations, sailing schedules and capacity utilisation may enable faster and more efficient transport of cargo, tailored to the concrete demands on different routes. It may also support sustainability, as better cargo and space utilisation reduces the number of voyages and thus decreases the negative impact on the environment. Signalling of prices may inform shippers and easier allow them to choose the best option. These factors arguably signal that cooperation in liner shipping primarily should be assessed under the ‘effect’-alternative.

However, simply pointing to such transporting efficiencies provides no safe harbour for liner shipping companies. Should the exchange of information exceed what is necessary to achieve the efficiencies, it may, depending on the circumstances, be categorised as an ‘object’-infringement.(49) Communication 2022/C164 para.409. Should the excess information enable price-fixing, that restriction is not justified by improved cargo-utilisation. For pure information exchanges, Container Shipping shows how also signalling can have little value for customers, depending on its characteristics. The Commission emphasises the unbinding character of GRIs and that customers are unable to compare prices with certainty.(50) Case AT.39850 Container Shipping paras.43-44. If the public information is less available or less relevant for customers than for competitors, it can be considered as lacking efficiencies.

Pure information exchanges thus require complex assessments of the relevant characteristics. The evaluation assists in answering the research question, as one may, by identifying these characteristics, attain substantial guidance to whether the exchange in question is contrary to Art. 101 (1). Container Shipping exemplifies how to conduct that assessment in liner shipping.

3.3.3 Public announcements restricting competition in Container Shipping

Considering whether the information exchange restricts competition by object requires a case-by-case approach.(51) Capobianco (2004) p.1250. The starting point is whether the exchange is “capable of removing uncertainty between participants as regards the timing, extent and details” of their future modifications of conduct.(52) Case C‑286/13 P Dole (CJEU) para.122.

On the one hand, the wording “capable of removing uncertainty” implies a lower threshold than the restrictive interpretation currently established. On the other hand, detailed and specific information may be required in order to remove uncertainty regarding “timing, extent and details” of competitors’ future modifications of conduct. Arguably, the threshold can be deducted to require concrete facts to reveal future conduct, but not evidence of the exact restriction.

The remaining assessment depends on the concrete characteristics of the exchange and the methodical approach applied. Although private communication may cause more significant concern for collusion, also public announcements can fulfil the criteria.

In Container Shipping, the Commission first restated the general condition that the cooperation must reveal a sufficient degree of harm to competition. If so, it is not necessary to consider the effects. Even though the required threshold was not commented, three relevant points of consideration were presented and analysed, in that order:

  1. The content (and nature) of the concerted practice,

  2. The objectives behind the practice, and

  3. Its economic and legal context.(53) Case AT.39850 Container Shipping para.48.

Regarding its content and nature, it was held that future pricing constitutes the most sensitive commercial information. Additionally, GRIs were announcements of future intentions rather than of actual and current prices. Moreover, GRIs included the intended implementation date and the geographic area concerned. Finally, the GRIs were individualised as each company’s intentions were identifiable.(54) Ibid. paras.35 and 50-51.

As with public announcements generally, the GRIs may have had the objective of informing customers and increasing their predictability when planning future shipments of cargo. However, the Commission pointed to GRIs’ potentially limited value for shippers and raised the concern that the objective possibly were to communicate pricing intentions “to competitors rather than informing customers.”(55) Ibid. para.52.

The economic and legal context revealed that a large number of GRI rounds had taken place. That regular practice may have allowed the carriers to “develop a climate of mutual certainty” regarding each other’s prices. Additionally, the GRIs were announced regardless of high or low prices and may have had “limited connection to real market conditions.” Due to these factors, the announcements possibly allowed liner shipping companies to coordinate their prices.(56) Ibid. paras.49 and 53-54.

By preliminarily finding an ‘object-infringement’, the Commission seemingly distinguished concerted practices from restrictions by object only by taking into account the frequency and duration of the exchange. It argued that competing carriers are presumed to use the information announced when determining their own conduct, and “even more so when the concertation occurs on a regular basis and over a long period.”(57) Ibid. paras.35-36.

Nevertheless, the concrete assessment shows that the Commission considered, or at least pointed to, several other factors, namely that the GRIs

  1. concerned future intentions,

  2. provided individualised data,

  3. were commercially strategic and sensitive, and

  4. had limited value for customers.(58) Ibid. paras.35 and 49-54.

The characteristics applied in Container Shipping largely correspond to the case law discussed above. The finding of an ‘object’-infringement may therefore be contingent on identifying several of these characteristics. Identifying more of them arguably increases the likelihood of finding an ‘object-infringement.’ Similarly, the more sensitive information exchanged, or the more explicit a company’s future intentions are expressed, the more likely it is to remove uncertainty regarding competitors’ future modifications of commercial conduct.

Container Shipping exemplifies how to apply the analytical approach in liner shipping cases. The structure clearly follows a two-step analysis, as the Commission initially evaluated the content and nature of the GRI-practice, before placing it in the economic and legal context.

Applying the orthodox approach, the liner shipping companies would likely evade the categorisation of an ‘object’-infringement. Although the GRIs concerned highly sensitive information (future prices) the practice was based on unilateral announcement of each carrier. Unilateral public announcements fall outside the typical restrictions by object. Applying a restrictive interpretation of the ‘object’-alternative, the GRIs are likely placed outside of the “object box.” The question would therefore become whether the practice had anti-competitive effects, in which the economic and legal context would be a central consideration.

Simultaneously, the Commission’s regard to the context of the exchange was scarce. One may argue that identifying a large number of GRIs over a long period of time does not require any considerable analysis of the context nor market structures. In that sense, the GRIs were not placed within the functioning of the market, at least not explicitly. This may support that the distinction between the orthodox and analytical approach remains theoretical and is not appropriate in all cases of information exchange.

This section has uncovered important characteristics when assessing pure information exchanges, and an example of the assessment has been illustrated in Container Shipping. Since the question is whether the exchange removes uncertainty regarding competitors’ modifications of future conduct, the totality of the exchange must be considered. Defining the relevant market seems decisive, as its definition affects the exchange’s context, such as the degree of concentration and transparency the market. To deem pure information exchanges as restrictions by object, the removal of uncertainty should be easily identifiable within the economic and legal context of the liner shipping market. Consequently, in terms of the research question, liner shipping companies may reduce the chances of having their public announcements pursued by competition authorities by infrequently announcing only highly aggregated data and refrain from speculating on future developments of competitive parameters.

Many of the observations regarding the exchange’s characteristics and market conditions are relevant also in the next section, which addresses information being exchanged ancillary to a formal agreement.