(Un)guilty Without Fault In Cartels

One might be accused of participating in a cartel even in the absence of fault. However, the European Court of Justice, which developed this doctrine, tends to restrict it and this is evident in the recent cases which originated in the decisions of the neighbouring Baltic countries – Lithuanian and Latvian Competition Councils.   

Andrius Ivanauskas

It is well known that a prohibited agreement among rivals may consist of not only a written agreement under which the parties undertake to adopt anticompetitive practices. In principle, any exchange of signals among competitors for the purpose of coordination of conduct on the market is prohibited.

What is more, as pointed out by the European Court of Justice, in most cases the existence of an anti-competitive practice or agreement may be inferred from a number of coincidences and indicia which, taken together, may, in the absence of another plausible explanation, constitute evidence of an infringement of the competition rules. In other words, in certain cases there is no need to provide any evidence of direct communication between the parties, the subsequent conduct by the parties can be sufficient to prove the presence of harmonised actions.

In some sense, this presumption of collusion contradicts the fundamental principles of law which stipulate that no person can be punished, if s/he has not taken any unlawful actions or if s/he is not guilty of those actions. This is especially relevant when the alleged communication among competitors is identified via a third party − an agent, representative, service provider or administrator of IT platform.  

The issue of guilt is considered by the European Court of Justice (ECJ) in the latest case related to a forbidden agreement in Latvia which arose due to the alleged agreement among the parties while participating in public procurement.

Public Tender for the Supply of Food Products to Kindergartens in Jurmala

Following the announcement of a public tender for the supply of food products to kindergartens in Jurmala city, Latvia, several companies accidentally hired the same consultants for the preparation of bids. Partikas Kompanija addressed B&S Partneri; and the latter hired a subcontractor, namely, MMD Lietas. MMD Lietas received a draft bid from Partikas Kompanija which prepared the aforementioned draft on its own.

MMD Lietas was in parallel hired for the preparation of bids by DIV un Ko and Ausma Grupa, but Partikas Kompanija was not notified of this fact. Nevertheless, an employee of MMD Lietas used the bid prepared by Partikas Kompanija and referring to it and the prices indicated in the bid by Partikas Kompanija drew up the bids for the other two tenderers. In this way, the prices of Ausma Grupa were approximately 5 per cent lower than the prices of Partikas Kompanija, and the prices of DIV un Ko were 5 per cent lower than the bid of Ausma Grupa.

The Latvian Competition Council decided that all three companies breached Latvian (and EU) competition law as they prepared their bids together with the aim to simulate competition. The Competition Council held the view that these coordinated actions led to the distortion of competition; for this reason, the aforementioned companies were imposed fines.

The Supreme Court of Latvia applied to the European Court of Justice seeking for interpretation and clarification, whether the companies shall be held liable for the actions taken by their service provider, where such actions actually constituted a violation of competition rules.

The ECJ clarified that the Competition Council could not refer to a simple assumption that the use of the services of the same agent automatically meant a violation of competition rules. As explicitly stated by the ECJ, the service provider is no employee for whom a company takes all responsibility without any restrictions, and that a company can be held liable for the actions of its service provider, if any of the following conditions are present:

  • A service provider actually carries out its activities while being operated and controlled by a company which ordered its services (i.e. it is not independent).
  • A company is aware of the anticompetitive practices aimed at by the rivals and intends to actively join them.
  • A company can reasonably foresee/anticipate the anticompetitive behaviour of its competitors and is ready to take on the risk arising there out.

In other words, the ECJ pointed out that a certain level of fault in the actions by the suspected offender (at least his/her/its indirect guilt or negligence) had to be proven. It follows from the ECJ’s interpretation that a company shall not be considered responsible for the conduct of its service provider, if the service provider failed to notify its client of the use of received information for anticompetitive purposes.

Correlation with the Lithuanian E-turas’ Case

Although based on some different motives, the ECJ drew similar conclusions in the E-turas case, whereby Lithuania’ Competition Council fined travel agencies for the limitation of discounts while selling trips on the E-turas platform.

In this case, E-turas circulated a message to all users of its system stating that standard discounts on on-line sale of trips were limited to 3 per cent. Travel agencies were still able to grant some additional discounts to their clients; however, some additional technical operations had to be carried out to this end.  Given such situation, Lithuania’s Competition Council argued that by expressing their common will with regard to the conduct on the market travel agencies indirectly, implicitly or by silent accord concluded a cartel.

In this case, the European Court of Justice could not fully agree with the opinion of the Competition Council. First of all, the ECJ highlighted that the agencies could have simply been unaware of the message limiting the size of discounts. Moreover, the ECJ made it clear that a certain conduct of a travel agency might demonstrate that it did not participate in the commitment of violation (for instance, by giving discounts on a continual basis or by not trading via the E-turas system at all).

That is to say that in the case of E-turas, the European Court of Justice also provided the suspected offenders with the opportunity to defend themselves by means of standard legal methods − by proving the absence of their fault and unauthorised actions.

As can be seen from the developing practice of the European Court of Justice, new situations often imply taking a different − new − look at the competition rules, in particular, where technology innovations come into play. On the other hand, the fundamental principles of law should never be forgotten, i.e. at least a tiny detail of fault of a suspect has to be spotted in the conduct of the offender in all cases. 

Andrius Ivanauskas, Associate Partner, Law Firm GLIMSTEDT

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