Scope and the Burden of Proof
This paper aims to identify the scope of Article 101 TFEU, in respect to concerted practices. When such a case arises, the key issue is the burden of proof. The titles under which the paper is structured are as follows:: 1.Introduction, A. Scope, B. Prisoners’ Dilemma; 2.Plausible Explanations; 3.Burden of Proof; 4.Aditional evidence on concentrations; 5.Conclusions.
- A. Scope
The term is used sometimes to refer to the whole of old Article 81 EC, now 101 TFEU, in contrast to unilateral practices which are caught by old Article 82 EC, now Article 102 TFEU; other times it is used to refer just to practices in contrast to contracts, i.e. explicit agreements. Here questions arise to the burden of proof.
Article 101 TFEU applies to agreements and coordinated practices. That is, Article 101 TFEU requires at least a concurrence of wills or a meeting of minds between the undertakings concerned. If the market conduct of an enterprise is not the result of either an agreement or at least a conscious common intention of coordination among competitors, Article 101 TFEU is not
As the ECJ stated in ICI, Article 101 TFEU draws a distinction between the concept of “concerted practices” and the concepts of “agreements between undertakings” or “decisions by associations of undertakings”. As explained by the ECJ, the reference to concerted practices in Article 101 is intended to bring within the scope of the prohibition a form of coordination between undertakings which, without having reached the stage where an agreement properly so called has been concluded, knowingly substitutes practical cooperation between them for the risks of competition.
The question therefore arises as to what extent, if any, parallel behaviour in an certain market is the result of a meeting of minds or whether, on the contrary, it is the result of the autonomous will of each undertaking? .
The ECJ stated in ICI that: “by its very nature, then, a concerted practice does not have all the elements of a contract but may inter alia arise out of coordination which becomes apparent from the behaviour of the participants”.
Therefore, concentration implies a form of cooperation that: (1) protects the undertakings concerned from the risks of competition; and (2) usually becomes apparent from the behaviour of the participants (for example, from parallel conduct with regard to their pricing policy).
B. Prisoners’ Dilemma or Game Theory.
According to game theory, if in a game the worst solution for each player is to ignore the behavior of the other players, since such behaviour will affect the outcome of the game, the players will end up cooperating. They will either decide from the very first moment that reaching an agreement is the most advantageous solution, or they will reach the conclusion that it is necessary to cooperate by trial and error. In such a case, the players will cooperate “as if” they had reached an agreement. For game theory it does not matter whether such cooperation is reached through an express agreement or by tacit cooperation (acting “as if” there was an agreement). What matters is whether the conditions of the game create the incentives for the players to cooperate.
The position of the ECJ in ICI must be read in light of the subsequent cases, and mainly in light of Woodpulp II. In Woodpulp II, the ECJ reformulated its previous statement in ICI. The ECJ again said that account must be taken “of the nature of the products, the size and the number of the undertakings and the volume of the market in question”, but with an important difference. The goal of such an analysis is no longer to establish what “the normal conditions of the market” are but to ascertain whether or not the parallel conduct can be explained otherwise than by concentration. Thus, the case law must be seen as an evolution whose outcome is clear. Parallelconduct is not prohibited, and it does not create a presumption iuris tantum of collusion. Nevertheless, parallel conduct can be considered sufficient proof of collusion if concentration is the only plausible explanation.
2. Plausible explanations
The list of plausible explanations is not exhaustive, but to date, two main circumstances
have been considered to be plausible explanations for parallel behaviour: (1) price
leadership; and (2) market structure.
As said before, it is legitimate for economic operators to adapt themselves intelligently to the existing and anticipated conduct of their competitors.
Consequently, if there is a price leader in the market, competing undertakings could try to adapt themselves to the leader’s commercial policy. Such parallel pricing behavior in an oligopoly, for instance, producing homogeneous goods would not in itself amount to concentration within the meaning of Article 101 TFEU.
A price leader could be characterised as an economic operator which due, for example, to its market share, is able to act independently of its competitors, knowing that they would almost certainly follow suit (“dominant price leadership”). Another possibility is so-called “barometric price leadership”, where the firm taking the lead is not dominant but is widely accepted as the best performing operator in the sense of meeting demand and adapting to evolving market conditions (i.e. cost increases).
The conclusion could be quite different if additional evidence is adduced, such as evidence of contacts between undertakings on desirable price changes prior to the adoption of a new price, or of an exchange of information that reinforces such contacts. In any event, an agreement between competitors to follow or to choose a price leader will be regarded as concentration within the meaning of Article 101 TFEU.
Another possibility is that the very structure of the market leads to parallel conduct (in oligopolistic markets).
The ECJ has implicitly acknowledged that, in some markets (i.e oligopolistic), competitors are interdependent. Accordingly, in Woodpulp II the ECJ appointed a group of economic experts to examine the characteristics of the affected market during the period covered by the Commission’s contested decision. After examining the market in the relevant period, the experts concluded that the normal operation of the market was a more plausible explanation for the uniformity of prices than concentration. The ECJ accepted this as a plausible explanation for the parallel conduct and upheld the applicants’ argument that the Commission had not sufficiently proved concentration within the meaning of Article 101 TFEU. It is worth noting that, in Woodpulp II the experts did not say that the normal operation of the market was the sole plausible explanation for the uniformity of prices. For the ECJ, it was enough that there were other explanations apart from collusion. Concentration thus cannot be inferred from the mere existence of parallel conduct.
3. Burden of proof
To what extent, if any, the market characteristics amount to a concerted practice within the meaning of Article 101 TFEU? The ECJ has acknowledged that, although each economic operator must determine its own commercial policy independently, it is legitimate for the economic operators to adapt themselves intelligently to the existing and anticipated conduct of their competitors. However, if adapting intelligently to the existing and anticipated conduct of their competitors is legitimate, it is foreseeable that all the existing operators will adapt similar conduct, i.e. parallel conduct. Such conduct could be easily read as an evidence of “coordination which becomes apparent from the behaviour of the participants”, mainly in oligopolistic markets.
The ECJ rightly acknowledged this, and ruled that parallel conduct as such is not caught by Article 101 TFEU and creates no presumption of collusion between the undertakings concerned.
– Nevertheless, the Court’s case law seemed to provide for two guidance of this substantive rule:
a) First, in ICI the ECJ stated that, although parallel behaviour may not by itself be identified with a concerted practice, parallel conduct may amount to strong evidence of concentration if it leads to conditions of competition which do not correspond to the normal conditions of the market, having regard to the nature of the products, the size and number of the undertakings, and the volume of the said market.
b) Second, in Woodpulp II the ECJ ruled that parallel conduct cannot be regarded as proof of concentration unless concentration constitutes the only plausible explanation for such conduct..
In spite of the fact that the language varies from one case to another, these two “exceptions” can be read as a single one: parallel conduct is not proof of concentration if the conduct of the enterprises can be explained by market conditions.
According to the case law of the ECJ, in order to establish that parallel behaviour is the result of concerted action, the evidence must be “sufficiently precise and coherent”. In the light of the foregoing, in Woodpulp II Advocate General considered that this statement of the ECJ implied that it is necessary to establish a degree of certainty that goes beyond any reasonable doubt. He further added that, in “accordance with the principles governing the burden of proof, it is for the Commission to demonstrate that; the burden of proof cannot be shifted simply by a finding of parallel conduct”. Moreover, the Advocate General considered that, in any event, if a plausible alternative explanation is put forward by the parties, then concentration cannot be deemed to be established.
The position of Advocate General Darmon in Woodpulp II was quite clear: the burden of proof is always borne by the competition authority. Parallel conduct neithercreates a presumption of concentration nor shifts the burden of proof. In view of the conclusions of Advocate General Darmon, in Woodpulp II the ECJ ruled on this point as follows:
“ Since the Commission has no documents which directly establish the existence of concentration between the producers concerned, it is necessary to ascertain whether the system of quarterly price announcements, the simultaneity or near-simultaneity of the price announcements and the parallelism of price announcements as found during the period from 1975 to 1981 constitute a firm, precise and consistent body of evidence of prior concentration.
 In determining the probative value of those different factors, it must be noted that parallel conduct cannot be regarded as furnishing proof of concentration unless concentration constitutes the only plausible explanation for such conduct. It is necessary to bear in mind that, although [Article 101] of the Treaty prohibits any form of collusion which distorts competition, it does not deprive economic operators of the right to adapt themselves intelligently to the existing and anticipated conduct of their competitors (see the judgment in Suiker Unie, cited above, paragraph 174).
 Accordingly, it is necessary in this case to ascertain whether the parallel conduct alleged by the Commission cannot, taking account of the nature of the products, the size and the number of the undertakings and the volume of the market in question, be explained otherwise than by concentration.”
The position of the ECJ seems, at first glance, to follow Advocate General Darmon. However, this may not be a realistic interpretation of the existing case law.
First, competition authorities reason, sometimes, in a quite different way: parallel conduct is either proof of concentration, or at least creates a presumption of collusion. No matter how the case law defines the principles governing the burden of the proof in these cases, a competition authority will presume the existence of concentration if there is parallel behaviour. It will then be a hard task for the defendants to find “sufficiently precise and coherent” evidence that concentration is not the only plausible explanation. It is neither practical nor realistic to expect competition authority officials to presume that there is no concentration when facing with parallel behaviour.
Second, Woodpulp II must be read in the light of the previous case law. Indeed, in CRAM and Rheinzink, the ECJ stated: “The Commission’s reasoning is based on the supposition that the facts established cannot be explained other than by concerted action by the two undertakings. Faced with such an argument, it is sufficient for the applicants to prove circumstances which cast the facts established by the Commission in a different light and which thus allow another explanation of the facts to be substituted for the one adopted by the contested Decision” (emphasis added).
This seems to be a much more practical approach. Competition authorities tend to presume that parallel conduct is the result of concentration if they see no clear evidence supporting an alternative explanation. It is then for the defendants to provide an alternative plausible explanation.
This does not mean that a competition authority must never look for alternative explanations. As an initial matter, a competition authority must also examine on its own initiative whether such an alternative explanation exists or not. However, if after a preliminary analysis the competition authority does not find a plausible alternative explanation, the burden of proof will shift to the defendants. It is then for the defendant undertakings to provide evidence which casts the facts established by the competition authority in a different light and which thus allows another explanation for those facts.
4. Additional evidence of concentration
Nevertheless, the problem of the plausible explanation, the burden of proof or the structure of the market only arises if evidentiary support for the case is insufficient. Parallel conduct could be considered as proof of collusion if it can be connected with other evidence of collusion, in particular with facilitating practices or “plus factors”. These facilitating practices have been defined as activities that promote interdependent behaviour among competitors by reducing their uncertainty as to each other’s future action, or by diminishing their incentive to deviate from a coordinated strategy.
For instance, parallel conduct can be deemed to be proof of concentration if it is accompanied by evidence of any of the following:
Taken together, a finding of parallel market conduct and documents which show that the practices were the result of concerted action are sufficient proof of concentration.
Contacts between competitors.
In its landmark Sugar case, the ECJ held that Article 101 TFEU strictly precludes any direct or indirect contact between operators that can influence the conduct on the market of an actual or potential competitor. In such a case, the defendants cannot explain the existence of the parallel conduct by the fact that they have adapted intelligently to the existing and anticipated
conduct of their competitors. Such contacts remove in advance the uncertainty as to the future conduct of the competitors, and thus protect the undertakings from the risks of competition.
These contacts could consist of, for example, meetings between competitors.
Disclosing to competitors the course of conduct that each undertaking
has decided to adopt (or contemplates adopting) on the market.
For example, announcements of price increases, together with parallel conduct, can be regarded as proof of concentration.
Exchange of Information.
Exchange of sensitive data can be considered proof of concentration, especially if the data are closely linked to the competitive conditions in respect of which the conduct of competitors is parallel.
Reciprocal supply agreements between competitors.
Reciprocal supply agreements between competitors could be regarded as proof of concentration, especially if, at the same time, the concerned undertakings refrain from supplying competitors’ clients.
Common board members.
Having representatives on the board of directors or any other management body of a competitor could be considered a device facilitating collusion.
Associations of enterprises.
If all (or the majority) of the undertakings investigated are members of an association of enterprises, this can be an element supporting an accusation of concentration by a competition authority.
Network of joint ventures coordinated by a parent company.
In the Optical fibers case, the Commission found that concentration in an oligopolistic market could result of a network of interrelated joint ventures with a common technology provider and a common parent company..
The above non-exhaustive list of examples shows that, in the presence of parallel conduct, any device, practice or framework facilitating collusion can be considered sufficient supporting proof of concentration. In such cases, it is not enough for the defence merely to provide a plausible alternative explanation of the parallel conduct. The additional proof (exchange of information, documents, etc.) must also be rebutted.
Furthermore, it should be recalled that most of the facilitating practices can serve precompetitive as well as anticompetitive purposes. Therefore, the mere fact that some sort of facilitating practice exists should not alone lead to a conclusion of illicit collusion among the defendants.
Since direct proof of illicit collusion is often difficult, when parallel behaviour is accompanied by facilitating practices, as a matter of practice, competition authorities tend to shift the burden of proof to defendant undertakings.
The key issue is to distinguish between situations in which strategic coordination implies some sort of illicit collusion and when it merely corresponds to spontaneous coordination resulting from the rational response of each member of the market to the perceived interdependencies.
 Case 48/69 Imperial Chemical Industries Ltd. v Commission  ECR 619
 Joined Cases 40 to 48, 50, 54 to 56, 111, 113 and 114/73, Suiker Unie v Commission  ECR 1663, para. 173-174.
 Commission Decision EEC/84/405 of 6 August 1984, Case IV/30.350 – zinc producer group, OJ L 220 , pars. 75-76.
 Joined Cases -89/85, C-104/85, C-114/85, C-116/85, C-117/85 and C-125/85 to C-129/85 A. Ahlström Osakeyhtiö e.a. (Woodpulp II)  ECR I-1307, para. 75 and the following.
 Joined Cases 40 to 48, 50, 54 to 56, 111, 113 and 114/73 Suiker Unie v Commission  ECR 1663, para. 173-174
 Case 172/80 Gerhard Züchner v Bayerische Vereinsbank AG  ECR 1981 para 14 and the following
 Case 48/69 Imperial Chemical Industries Ltd. (ICI) v Commission  ECR 619, para. 65
 Case 48/69 Imperial Chemical Industries Ltd. (ICI) v Commission  ECRR 619, para. 66.
 Joined Cases C-89/85, C-104/85, C-114/85, C-116/85, C-117/85 and C-125/85 to C-129/85, A.Ahlström Osakeyhtiö e.a. (Woodpulp II)  ECR I-1307, para. 71.
 Joined Cases 29/83 and 30/83 Compagnie Royale Asturienne des Mines SA (CRAM) and Rheinzink GmbH v Commission  ECR 1679, para. 20.
 Joined Cases -89/85, C-104/85, C-114/85, C-116/85, C-117/85 and C-125/85 to C-129/85 A. Ahlström Osakeyhtiö e.a. (Woodpulp II)  ECR I-1307
 See Opinion of Advocate General Darmon in Joined Cases -89/85, C-104/85, C-114/85, C-116/85, C-117/85 and C-125/85 to C-129/85, A. Ahlström Osakeyhtiö e.a. (Woodpulp II)  ECR I-1307,para. 96 and 196.
 See Joined Cases T-305/94, T-306/94, T-307/94, T-313/94 to T-316/94, T-318/94, T-325/94, T-328/94, T-329/94 and T-335/94 Limburgse Vinyl Maatschappij NV, Elf Atochem SA, BASF AG, Shell International Chemical Company Ltd, DSM NV, DSM Kunststoffen BV, Wacker-Chemie GmbH, Hoechst AG, Société artésienne de vinyle, Montedison SpA, Imperial Chemical Industries plc, Hüls AG and Enichem SpA v Commission (PVC II)  ECR II-931, para. 728.
 Idem, para. 724-728.
 Case 48/69 Imperial Chemical Industries Ltd. (ICI) v Commission  ECR 619, para. 83 and the following.
 Joined Cases 40 to 48, 50, 54 to 56, 111, 113 and 114/73, Suiker Unie v Commission  ECR 1663, para. 173-174.
 Commission Decision EEC/86/405 of 14 July 1986, Case IV/30.320 – optical fibers,OJ L 236