„Trick or Treat“ – A Halloween reflection on antitrust law

Today is officially the spookiest day of the year: Halloween. A time when little (and not-so-little) costumed kids roam the streets for candy and horror movies haunt every TV channel. But the phrase “trick or treat” – often heard on this special day – does not only apply to all the fantastic chocolate bars and gummy worms that can fill the pockets. So, grab your pumpkin spice latte and join me in taking a look at some antitrust cases with a seasonal twist.

Hollywood´s haunted monopoly

Even if horror movies are not your favourite genre, there is no escaping them at Halloween. Who does not know Universal Studio´s iconic monsters – Dracula, Frankenstein and The Invisible Man – lurking from the early 1930s? This time was also the era of the Hollywood studio system, where production, distribution and exhibition were vertically integrated into the respective studio. Studios practiced “block booking”, bundling films into all-or-nothing packages, forcing theatres to accept several mediocre titles for every coveted hit. A real “trick” hidden behind a “treat”.

In 1948, the US Supreme Court delivered its famous Paramount decision. The court ruled that block booking was illegal and declared the major studios guilty of monopolization, as a result forcing the divestiture of theatre chains and the abandonment of block booking. This decision ultimately led to the so-called Paramount Decrees, which required the studios to divest either their distribution operations or their theatres. Even though the decision shattered Hollywood´s monopolistic chains, Halloween reminds us that some monsters – at least on screen – are never truly buried.

The elevator cartel: “Tricks” behind closed doors

Halloween tales come in all shapes and sizes – and in all sorts of spooky locations. Think of The Shining: a chilling story set in a hotel. Similarly, the famous “Elevator Cartel” conducted secret meetings in (maybe not so spooky) hotels and restaurants, enabling the parties to engage in various cartel activities. In order to conceal their contacts, the participants used private or separate telephones and even pre-paid cards (a quick reminder that the cartel took place from 1995 to 2004, so smartphones were not really an option). And because nothing screams ”mystery“ like a Halloween mask, the cartel members even devised a system of secret code names to ”mask“ their real identities on the project list.

However, the European Commission (Commission) demystified the cartel by starting an ex officio investigation. It found that the four participants operated a cartel for the installation and maintenance of lifts and escalators in Belgium, Germany, Luxemburg and the Netherlands. According to the Commission, the participants rigged bids for procurement contracts, fixed prices and allocated projects to each other, shared markets and exchanged commercially important and confidential information – a true horror show for competition.

In the end, the Commission let a nightmare come true for the parties and set a fine of over EUR 990 million. One participant later escaped part of the curse – the General Court reduced its fine by approx. EUR 160 million, ruling that the Commission´s 50% increase for prior infringement was not justified. Still, the trick was up, and the treat was a hefty bill.

Sweet temptation: The candy cartel

Halloween would not be Halloween without candy – and in 2013, the German Federal Cartel Office (FCO) took the protection of candy prices very seriously (although it is not confirmed that Halloween played a role). It imposed fines of more than EUR 60 million on several confectionary manufacturers. The FCO found that the cartel initially arose from price increases for important raw materials for the production of chocolate, such as milk and cocoa. To ensure the increased prices could be passed on to consumers, the parties opted for a “trick” instead of finding an entrepreneurial solution.

In its decision, the FCO identified the following conduct:

• Price agreements for chocolate bars
• A “four party” discussion group, involving price agreements and exchange of information
• Exchange of information in a working group of a confectionary industry association

The case kept not only the FCO, but also the Higher Regional Court of Düsseldorf busy. After years of back-and-forth and delays – inter alia caused by the COVID-19 pandemic (a scenario that could also be right out of a Hitchcock movie) – the court ruled in 2023 on the working group´s conduct and reduced the fines. Among the reasons cited for the reduction was the implementation of stronger compliance measures by the companies in the last years, including regular antitrust training. That’s how you beat the villain!

Competition or Collusion? A seasonal reminder

Halloween invites us to peek behind the mask and reveal the secrets behind it. The phrase “trick or treat” becomes a fitting metaphor for business behaviour: Fair competition – the sweet treat. Collusive action – a trick. In this sense, regulators and courts can take the form of the ultimate candy distributors: Handing out treats or sour surprises in the form of hefty fines. During this spooky season think of compliance programs as your knight´s shield, keeping you safe from the ghosts of fines and lawsuits. However, if that sounds too dramatic to you, maybe it is just the ghosts of Halloween whispering in my ear…

Photo by Steven Van Elk on Unsplash