Not everything should go public

Co-authored by Marcel Döhren

The public perception of what constitutes an antitrust infringement has evolved over the past decades. The notion of antitrust violations happening as meetings of CEOs agreeing to raise prices over cigars in the back room of a nice Italian restaurant or on the golf course has long been outdated (but not forgotten…). Most companies have also understood that the exchange of competitively sensitive information with competitors is critical from an antitrust point of view. But what about sharing information publicly?    

Public statements in the focus of antitrust authorities

As we reported not so long ago, the president of the German Federal Cartel Office (FCO) stated that the FCO is actively exploring novel methods for cartel detection, such as screening markets through the evaluation of publicly available data. Publicly shared information reportedly also played a role in recent FCO and European Commission (Commission) investigations. This raises the question where the line between legitimate public statements and unlawful public exchange of information is drawn by regulators.    

Old cases and the take of the Commission

Some might recall the 1993 Wood Pulp decision by the ECJ. The case concerned a system of quarterly announcements of wood pulp producers in which they communicated to their customers and agents the prices they wished to obtain in the quarter in question for each type of pulp, some weeks or, at times, some days before the beginning of each quarter. The prices were generally published in the trade press; however, the actual transfer prices agreed with customers varied depending on whether rebates etc., were granted bilaterally.

Back then, the Commission found that the system of public announcements “was deliberately introduced by the pulp producers in order to enable them to ascertain the prices that would be charged by their competitors in the following quarters”. According to the regulator, “the disclosure of prices to third parties, especially to the press and agents working for several producers, well before their application at the beginning of a new quarter gave the other producers sufficient time to announce their own, corresponding, new prices before that quarter and to apply them from the commencement of that quarter”.

Yet, the ECJ annulled the Commission decision and held that at the time when the announcements were made by each undertaking, the respective undertaking could not be sure how the other companies on the market would behave.

The Commission required some time to recover from that defeat but initiated another case against various container shipping lines in 2013 (following dawn raids in 2011). The shipping lines had publicly announced price increases one after the other with a lead time of 3 to 5 weeks. After some back and forth, the case ended with the shipping companies committing to change their practice. It was therefore not decided whether their public announcements ultimately infringed antitrust law.

In its new version of the Horizontal Guidelines published last year, the Commission states that “the fact that an undertaking discloses commercially sensitive information through a public announcement (for example, through a post on a publicly accessible website, a statement at a public event or in a newspaper) does not in itself exclude the possibility that the announcement may constitute” an antitrust infringement.

According to the Commission, company representatives commenting on market events through unilateral public announcements or disclosing strategies on how to react to changing market conditions can lead to an antitrust infringement because undertakings must determine independently which behaviour to adopt on a certain market. However, it remains open under which circumstances such announcements actually constitute an infringement.

What the FCO thinks

The FCO dealt with one-sided public announcements in its sector inquiry on cement and ready-mix concrete. During this inquiry, the FCO found that producers made public statements about future pricing and issued letters to customers in which they announced future price increases. In the opinion of the FCO, such price increase letters are suitable to facilitate the coordination of suppliers in the oligopolistic cement market by using them as market signals and indicating a desired market outcome.

The FCO held that this was particularly true against the backdrop of a very high level of transparency in this vertical integrated market. The unilateral disclosure of information could therefore constitute a concerted practice, in particular if it was based on reciprocity or if other companies were to join these actions.

What to do?  

There is currently no clear guidance from regulators or courts regarding public statements by companies or their representatives. However, there are some basic rules that can be followed to limit the risk of becoming the subject of an antitrust investigation:

• Always question whether planned price increases or changes in conditions to customers and other market participants need to be communicated publicly.
• Refrain from commenting on price increases of competitors or stating publicly that you will forward higher costs to your customers.
• Be cautious regarding general statements on your expectations of how the industry will react to certain developments in the market, e.g., an increase in raw material prices.
• Check your audience: who is listening, whom do I want to address, and what is the message? For example, who takes part in my investor calls?

And sometimes it is good to recall the adage: “Speech is silver, silence is golden.”

Co-author Marcel Döhren studies law at the University of Dusseldorf (and recently joined ROCAN as a student research assistant).

Photo (for this post) by Kristina Flour on Unsplash