According to the Commission, whenever a
producer has charged the same price as another producer for a given product in
a given region and during a given quarter, it must, in principle,be regarded as
having ‘concerted’, i.e. colluded with the other producer. But parallel conduct
cannot be regarded as furnishing proof of collusion unless collusion constitutes
the only plausible explanation for such conduct. Also, although Article 85 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.
This case gives the flavour of the problems
that can arise in trying to resolve difficult economic issues in a legal
framework. In March 1993, the European Court of Justice finally closed one of
the longest-running cases in competition law, the Woodpulp case, nine years
after the original decision by the Commission! This was a case where the Commission
had found that a group of Scandinavian, Canadian and US woodpulp producers had
operated a price cartel over a sustained period. The parties challenged the
Commission’s decision.
First, they challenged it on grounds of
jurisdiction. However, because the arrangements challenged in the decision had
effects within the Community, the Court found that the Commission had been
perfectly entitled to make a ruling on it, regardless of the place of origin of
the parties or of where the agreements were actually drawn up and signed.
Second, the parties claimed that ‘parallel
price behaviour’ did not amount to collusion. They claimed that it could be
explained by the operation of legitimate market behaviour. This turned into the
key issue.
Eventually, the Court commissioned two
reports by economic consultants to help
them come to a ruling on
the case. The first report dealt with parallelism of prices and, in particular,
whether the evidence justified the findings of parallelism of announced prices
and transactions prices. The second report analysed the woodpulp market during
the period in question.
According to these reports, the system of
price announcements agreed between the parties to the arrangement was
introduced in response to the producers’ customers.The quarterly cycle was the
result of a compromise between the consumer’s desire for a degree of predictability
as regards the price of pulp and the producer’s desire not to miss any
opportunities to make a profit in the event of a strengthening of the market. The
simultaneity or near-simultaneity of the price announcements could be explained
as reflecting a high degree of market transparency.
On the parallelism of announced prices, the
experts concluded that this could be
plausibly explained by
market conditions rather than collusion. The market in question was
oligopolistic on the producers’ side and also on the customers’ side. This led
to a situation where prices were slow to react in the short term.
On the basis of the expert reports, the
Court upheld the appeal by the companies
and quashed the fines
imposed by the Commission.
This case illustrates the complexity of
competition cases. The judicial process on
competition cases can be
protracted and uncertain. Note also that the remit of
the economic consultants
advising the Court was to discover whether a restrictive
arrangement existed. Had
they been asked to quantify the effects of such a possible
arrangement, the exercise would have been
even more prolonged.
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