Document 6516291

[2007] Comp Law
123
SECTION
WHAT IS AN AGREEMENT?
Peter Willis and Paul Hughes
INTRODUCTION
1
Recent case-law, including Commission v Volkswagen AG (Volkswagen II) and, in the UK, the
2
judgments of the Court of Appeal in Toys and Games and Replica Kit and of the Competition
3
Appeal Tribunal (CAT) in Makers UK Ltd v Office of Fair Trading, has put the spotlight once
more on a fundamental point: what is an ‘agreement’ for the purposes of Art 81 of the Treaty
of Rome 1957 (EC Treaty) and how does this concept dovetail with its companion term
‘concerted practice’?
4
In Bayer AG v Commission and Bundesverband der Arzneimittel-importeure EV and Commission
5
v Bayer AG, the Court of First Instance (CFI) held that the key issue is to show a concurrence
of wills between the parties, with the European Court of Justice (ECJ) indicating that the
parties should jointly intend to fulfil a common goal. As the ECJ explained:
’97. ... the Court of First Instance set out from the principle that the concept of an
agreement within the meaning of Article [81](1) of the Treaty ... centres around the
existence of a concurrence of wills between at least two parties, the form in which it is
manifested being unimportant so long as it constitutes the faithful expression of the parties’
intention. The Court further recalled, in paragraph 67 of the same judgment, that for there
to be an agreement within the meaning of Article 8[1](1) of the Treaty it is sufficient that
the undertakings in question should have expressed their common intention to conduct
themselves on the market in a specific way.
…
102. For an agreement within the meaning of Article 8[1](1) of the Treaty to be capable of
being regarded as having been concluded by tacit acceptance, it is necessary that the
manifestation of the wish of one of the contracting parties to achieve an anti-competitive
1
2
3
4
5
Partner and Head of EU & Competition, Dundas & Wilson LLP, and Consultant, Dundas & Wilson LLP and
Senior Academic, University of Westminster. This article is based on a paper by the authors delivered at IBC’s
EC Advanced Competition Law Conference in London, April 2007.
(Case C-74/04) [2006] ECR I-6585.
Argos Ltd v Office of Fair Trading; JJB Sports plc v Office of Fair Trading [2006] EWCA Civ 1318, [2006] 42 LS
Gaz R 32.
[2007] CAT 11, [2007] All ER (D) 49 (Mar).
(Case T-41/96) [2000] ECR II-3383.
(Cases C-2/01 P and 3/01 P) [2004] ECR I-23.
124
[2007] Comp Law
ARTICLES
goal constitute an invitation to the other party, whether express or implied, to fulfil that
goal jointly ...’
Interestingly, Bayer has been used as authority for a range of propositions on different aspects
of the scope of Art 81 EC, including propositions relating to the parties’ subjective intent and
to the extent to which liability under Art 81 EC can arise from tacit acquiescence with an
instruction. In Toys and Games and Replica Kit, the UK Court of Appeal (at para [141] of its
judgment), ruling on the interpretation of the Chapter I prohibition of the Competition Act
1998, used the ECJ’s judgment in Bayer as the basis for the following proposition:
‘… if (i) retailer A discloses to supplier B its future pricing intentions in circumstances
where A may be taken to intend that B will make use of that information to influence
market conditions by passing that information to other retailers (of whom C is or may be
one), (ii) B does, in fact, pass that information to C in circumstances where C may be taken
to know the circumstances in which the information was disclosed by A to B and (iii) C
does, in fact, use the information in determining its own future pricing intentions,[6] then
A, B and C are all to be regarded as parties to a concerted practice having as its object the
restriction or distortion of competition. The case is all the stronger where there is
reciprocity: in the sense that C discloses to supplier B its future pricing intentions in
circumstances where C may be taken to intend that B will make use of that information to
influence market conditions by passing that information to (amongst others) A, and B does
so.’
Using this formula as inspiration, this article, perhaps somewhat ambitiously, attempts to
reduce current Art 81 EC case-law to three similar, and to some extent overlapping, series of
propositions. Each of the three series of propositions represents a progression from a set of
facts that infringes Art 81 EC to one that does not, as follows:
6
As an aside, it is not clear that (iii) is a necessary element of the infringement. It is not necessary in a concerted
practice that the recipient of exchanged information should have acted upon it. It is sufficient that he should
have received it. See in this respect European Sugar Cartel, Re, Cooperatieve Vereniging Suiker Unie UA v
Commission (Cases 40/73, 41/73, 42/73, 43/73, 44/73, 45/73, 46/73, 47/73, 48/73, 50/73, 54/73, 55/73,
56/73, 111/73, 113/73 and 114/73) [1975] ECR 1633). The ECJ held (at para 174 of that judgment) that
Art 81 EC strictly precludes any direct or indirect contact the object or effect of which is to influence the
contacted party’s conduct on the market or which discloses the course of conduct the disclosing party intends to
or is contemplating adopting. There is no requirement that the disclosure should in fact have had the desired
effect.
[2007] Comp Law
125
Unilateral instruction or
express/tacit bilateral vertical
agreement
Competitors A and B expressly
agree in writing that they will both
charge the same price for their
products
Supplier A instructs reseller B not
to resell to customers outside the
territory in which B is located, and
B expressly agrees
A transmits pricing information to its
competitor B, and both parties intend
that B should act on that information in
order to align its prices with A’s and
thereby to restrict competition
Competitors A and B expressly
agree orally that they will both
charge the same price for their
products
Supplier A’s agreement with
reseller B provides that A may
instruct B not to resell to customers
outside the territory in which B is
located, or not to sell at less than a
specified price, and A issues such
instructions
A and B exchange pricing information
at a trade association meeting. C, who
is also present, receives information
from B and C, but does not transmit its
own pricing information to A or B. It
has no intention of aligning its prices
with those of A and B, nor that A and B
should align their prices with its own
Competitors A and B have a
gentlemen’s agreement (a morally
but not legally binding agreement)
that they will both charge the same
price for their products
Supplier A instructs reseller B not
to resell to customers outside the
territory in which B is located, or
not to sell at less than a specified
price, and B complies with that
instruction
A transmits pricing information to its
competitor B, but does not intend that
B should pass that information to A’s
competitor C
A discloses competitively sensitive
information on its future prices to
its competitor B who either
requested it, or accepts it
Supplier A instructs reseller B not
to resell to customers outside the
territory in which B is located. B is
reluctant to comply, but does so
under duress
A discloses competitively sensitive
information on its future prices to
its competitor B who neither
requested it, nor accepts it
Supplier A instructs reseller B not
to resell to customers outside the
territory in which B is located, and
B continues to deal with A, but does
not otherwise comply with the
instruction
A becomes aware of and responds
to its competitor B’s pricing
intentions, in the absence of any
communication from B
A determines its policy on the
market independently, with no
knowledge of its competitor B’s
intentions
From common intent to cross
purposes
ARTICLES
From express written
‘horizontal’ agreement to
‘intelligent adaptation’
126
[2007] Comp Law
ARTICLES
FROM EXPRESS WRITTEN (HORIZONTAL) AGREEMENT TO
‘‘INTELLIGENT ADAPTATION’’
This section summarises the progression, well-documented in several decades of case-law of
the European courts, from express agreements, via gentlemen’s agreements and concerted
practices, to intelligent adaptation to a competitor’s behaviour and thence to entirely
independent action.
Competitors A and B expressly agree in writing that they will both charge the same price for their
products
Written agreements, although for obvious reasons less commonly employed as a vehicle for
hard-core cartel activity these days, are clearly caught by Art 81(1) EC: Brasserie Nationale SA
7
and Others v Commission.
Competitors A and B expressly agree orally that they will both charge the same price for their
products
These are also caught. It is not necessary that the agreement be established in writing.
8
Competitors A and B have a gentlemen’s agreement (a morally but not legally binding agreement)
that they will both charge the same price for their products
The term ‘agreement’ has an autonomous meaning under Art 81 EC and catches arrangements
9
that do not constitute agreements for the purposes of contract law. So gentlemen’s agreements
– where the parties are not legally bound but consider themselves morally bound – can
constitute agreements for the purposes of Art 81 EC.
This principle applies in other situations where there is no legally binding agreement in place,
so, for example, there is an agreement for the purposes of Art 81 EC where two undertakings
are negotiating the terms of an agreement and have not yet reached a consensus, but believe
10
themselves to be morally bound by some of those terms, or where an express agreement has
11
expired but the parties continue to align their behaviour in accordance with the agreement.
A discloses competitively sensitive information on its future prices to its competitor B who either
requested it, or accepts it
In the absence of a legally or morally binding agreement or understanding, there may still be
an ‘agreement’ within the autonomous meaning given to the term under Art 81 EC if it can be
7
8
9
10
11
(Joined Cases T-49/02 to T 51/02) [2005] ECR II-3033.
Re Italian Flat Glass Industria Vetraria Alfonso Cobelli v Società Italiana Vetro-SIV SpA (EC Commission
Decision 89/93) [1990] 4 CMLR 535, on appeal Re Italian Flat Glass: Società Italiano Vetro SpA v Commission
(Cases T-68/89, T-77/89 and T-78/89) [1992] ECR II-1403.
ACF Chemiefarma NV v Commission (Case 41/69) [1970] ECR 661, at paras 107 and 110–112. See also
Commission Decision of 21 October 1998 relating to a proceeding under Article 85 of the EC Treaty
1999/60/EC (Case No IV/35.691/E-4 – Pre-Insulated Pipe Cartel) (1999) OJ L 24/1.
Jaeger v Opel Norge AS (Case E-3/97) (1998) OJ C 263/9, [1998] Rep EFTA Ct.
Commission Decision of 19 December 1990 relating to a proceeding under Article 85 of the EEC Treaty
91/297/EEC (IV/33.133-A: Soda-ash – Solvay, ICI) (1991) OJ L 152/1.
[2007] Comp Law
127
The ECJ has consistently held that independent undertakings must determine their
commercial policies independently and without reaching any understanding with competitors
as to the commercial policies they intend to adopt on the market. The concept applies to
collusive behaviour which falls short of a legally or morally binding agreement.
13
In Hüls AG v Commission (Polypropylene), the ECJ held, at paras 158 and 159:
‘The Court of Justice has consistently held that a concerted practice refers to a form of
coordination between undertakings which, without having been taken to the stage where an
agreement properly so-called has been concluded, knowingly substitutes for the risks of
competition practical cooperation ...
The criteria of co-ordination and co-operation must be understood in the light of the
concept inherent in the provisions of the Treaty relating to competition, according to
which each economic operator must determine independently the policy which he intends
to adopt on the market ...’
14
The court held in Suiker Unie that a concerted practice comprises:
‘174. ... any direct or indirect contact between such operators, the object or effect whereof
is either to influence the conduct on the market of an actual or potential competitor or to
disclose to such a competitor the course of conduct which they themselves have decided to
adopt or contemplate adopting on the market.’
15
In Apex Asphalt and Paving Co Ltd v Office of Fair Trading the CAT provided a very useful
summary of the relevant case-law of the ECJ and CFI in this area.
16
In Cimenteries CBR SA v Commission, the CFI considered to what extent disclosure of future
intentions, in the context of an alleged concerted practice, must be reciprocal. One of the
alleged cartel members argued that since the disclosure had been in only one direction, the
required element of reciprocity had been absent. The CFI disagreed:
‘1849. In that connection, the Court points out that the concept of concerted practice does
in fact imply the existence of reciprocal contacts (Opinion of Advocate General Darmon in
Woodpulp II, cited at paragraph 697 above, points 170 to 175). That condition is met where
12
13
14
15
16
See n 4, above, at para 67.
(Case C-199/92P) [1999] ECR I-4287.
See n 6, above.
(Case No 1032/1/1/04) [2005] CAT 4, [2005] CompAR 507, at para [206].
(Cases T-10/92, T-11/92, T-12/92 and T-15/92) [1992] ECR II-2667.
ARTICLES
demonstrated that the parties have ‘expressed their joint intention to conduct themselves on
12
the market in a specific way’. In practice, these arrangements are highly likely to be seen as
‘concerted practices’ and are the target of much of the EC Commission’s enforcement activity.
128
[2007] Comp Law
ARTICLES
one competitor discloses its future intentions or conduct on the market to another when the
latter requests it or, at the very least, accepts it.’ (emphasis added)
The interesting point that arises from this is what constitutes ‘acceptance’ for the purposes of
Art 81 EC. It is clear that if A requests price information from B, and B supplies that price
information in response to the request, there is sufficient concurrence of wills to constitute an
agreement. However, where is the concurrence of wills in a situation where A unilaterally
communicates price information to B, with no warning? It seems obvious that mere
involuntary receipt of an email – or being present at a meeting where a competitor
unexpectedly discloses its pricing intentions – cannot of itself be interpreted as acceptance of
the communication that it contains. However, the position of the Commission and the
European courts is that is not necessary that the recipient of such information should act on
the disclosure in order to be taken to have accepted it. It seems to be sufficient not to object to
having received the communication.
This theme was developed further on appeal to the ECJ, in Aalborg Portland A/S and Others v
17
Commission. The ECJ held that, once an undertaking has participated in cartel meetings, the
burden of proof shifts to that undertaking to demonstrate that it was not party to an unlawful
agreement, by:
‘81. … demonstrating that it had indicated to its competitors that it was participating in
those meetings in a spirit that was different from theirs.’
The reason for this is that:
‘82. ... having participated in the meeting without publicly distancing itself from what was
discussed, the undertaking has given the other participants to believe that it subscribed to
what was decided there and would comply with it.’
So it is not incumbent on the Commission to establish acceptance of unsolicited
communications. Instead, the onus is on the recipient to demonstrate that it did not accept the
disclosure, and the way to do that is by expressing clear objections to the disclosing party and
to any other competitors to whom that disclosure was also made.
A discloses competitively sensitive information on its future prices to its competitor B who neither
requested it, nor accepts it
The logical consequence of these cases, and of the principle that an agreement requires a
concurrence of wills, is that mere passive receipt of information about a competitor’s future
pricing intentions does not constitute an agreement for the purposes of Art 81 EC. The
difficulty in this case is probably more practical than legal – how to show that the information
was not sent in response to solicitation, and also that sufficient steps were taken to distance the
recipient from the communication.
17
(Cases C-204/00 P, C-205/00 P, C-211/00 P, C-213/00 P, C-217/00 P and C-219/00 P4) [2004] ECR I-123.
[2007] Comp Law
129
The next step towards a complete absence of concurrence of wills is the situation where there
is no direct communication between the parties. Although, as we have seen above, the ECJ
18
held in Suiker Unie that competitors are precluded from:
‘... any direct or indirect contact … the object or effect whereof is either to influence the
conduct on the market of an actual or potential competitor or to disclose to such a
competitor the course of conduct which they themselves have decided to adopt or
contemplate adopting on the market.’
they may:
‘174. ... adapt themselves intelligently to the existing and anticipated conduct of their
competitors ...’
So parallelism and intelligent adaptation are permissible in the absence of evidence of a
concerted practice.
19
In Ahlström Osakeyhtiö and Others v Commission (Woodpulp II) the ECJ stressed that parallel
conduct would constitute evidence of a breach of Art 81 EC where it was inexplicable
otherwise than as a result of the existence of a concerted practice:
‘71. Parallel conduct cannot be regarded as furnishing proof of concertation unless
concertation constitutes the only plausible explanation for such conduct. It is necessary to bear
in mind that, although Article [81] 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).’ (emphasis added)
‘72. 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 concertation.’
Could price signalling that falls short of communicating prices directly and specifically to
competitors (eg, issuing press releases or publishing price information on a website) give rise
to liability under Art 81 EC? In Woodpulp II, Advocate-General Darmon was of the opinion
that:
18
19
See n 6, above.
(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) [1993] ECR
I-1307 (Woodpulp II).
ARTICLES
A becomes aware of and responds to its competitor B’s pricing intentions, in the absence of any
communication from B
130
[2007] Comp Law
ARTICLES
‘249. ... in no circumstances can the behaviour of undertakings on a market, which comes to
the knowledge of their competitors, constitute in itself an exchange of information
amounting to concertation ...’
‘250. ... if they engage in conduct which is justified by commercial needs, I do not see on
what grounds it may be challenged.’
However:
‘251. ... practices which do not correspond to rational needs in the light of the
characteristics of a given market ... may amount to an exchange of information.’
So where undertakings deliberately communicate information in a market where this
behaviour is not explicable by customer need or market conditions, they are running a risk of
being considered to be engaged in concertation. Following Woodpulp II, it also remains the
case that, where undertakings are engaged in parallelism in a market where this is not
economically likely, this parallel behaviour may be seen as explicable only by the existence of a
concerted practice.
A determines its policy on the market independently, with no knowledge of its competitor B’s
intentions
There is no infringement of Art 81(1) EC. This behaviour cannot amount to an agreement or
concerted practice.
UNILATERAL INSTRUCTION OR EXPRESS/TACIT BILATERAL
VERTICAL AGREEMENT
The next section examines the progression from unilateral instruction to express bilateral
agreement. This situation is typified by Bayer. In the context of a vertical agreement, the
supplier wishes its resellers to act in a way (in this case, not to resell to customers located in
other territories) that, if it constituted the subject matter of an express agreement, would
infringe Art 81 EC. However, cases such as Bayer and Volkswagen II have made it clear that
where there is no concurrence of wills between the issuer and the recipient of such unilateral
instructions, there is no infringement. The progression in this case therefore goes from express
bilateral agreement, via unilateral instruction that is accepted tacitly by the recipient, to
unilateral instruction that is not accepted. It is probably in this area that there has been the
most movement in the case-law.
Supplier A instructs reseller B not to resell to customers outside the territory in which B is located,
and B expressly agrees
As in the case of express horizontal agreements, these arrangements constitute clear
infringements of Art 81 EC.
[2007] Comp Law
131
In Volkswagen II, the agreements between Volkswagen (VW) and its German dealers allowed
VW to require its dealers ‘to comply with all instructions issued for the purposes of the
agreement’ by VW. VW had threatened to terminate the agreements of those dealers who
offered discounts on new models and had exhorted them to observe ‘strict price discipline’.
The ECJ held that what was important was whether the agreement entered into by the parties
could authorise VW to issue instructions whose implementation would infringe the
competition rules. The CFI had found that while the agreement authorised VW to make
non-binding price recommendations, it did not authorise it to make binding recommendations.
The instructions had therefore not been the subject of any acceptance by the dealers, and there
was therefore no agreement for the purposes of Art 81 EC.
Supplier A instructs reseller B not to resell to customers outside the territory in which B is located, or
not to sell at less than a specified price, and B complies with that instruction
It is relatively uncommon that a formal distribution agreement contains express restrictive
terms. What is more common is that the supplier adopts a policy or issues instructions, and
there is then a question as to whether the distributors have tacitly accepted that policy or those
instructions by complying with them. In Volkswagen II, the ECJ noted that instructions from
VW – ie those that were not authorised by a specific provision of the agreement – could
subsequently have been accepted by dealers, either expressly or tacitly, by their conduct.
However, in this case – as the court pointed out – the Commission had relied entirely on its
interpretation of the contract and had not argued that the dealers had tacitly accepted VW’s
instructions.
This omission from the Commission’s case is somewhat surprising, because the Commission
has on a number of occasions successfully argued that an agreement has arisen from the tacit
acceptance of apparently unilateral instructions.
20
In Allgemeine Elektricitäts-Gesellschaft AEG-Telefunken AG v Commission, for instance, AEG
had a policy of refusing admission to its selective distribution network unless the applicant
agreed to adhere to minimum resale prices set by AEG. The court held that the exclusion of
candidate distributors on this basis was unlawful and was not unilateral behaviour falling
outside Art 81 EC:
‘37. Such a practice must be considered unlawful where the manufacturer, with a view to
maintaining a high level of prices ... refuses to approve distributors who satisfy the
qualitative criteria of the system.
38. Such an attitude on the part of the manufacturer does not constitute, on the part of the
undertaking, unilateral conduct which, as AEG claims, would be exempt from the
prohibition contained in Article [81](1) of the Treaty. On the contrary, it forms part of the
20
(Case 107/82) [1983] ECR 3151.
ARTICLES
Supplier A’s agreement with reseller B provides that A may instruct B not to resell to customers
outside the territory in which B is located, or not to sell at less than a specified price, and A issues
such instructions
132
[2007] Comp Law
ARTICLES
contractual relations between the undertaking and resellers. Indeed, in the case of the
admission of a distributor, approval is based on the acceptance, tacit or express, by the
contracting parties of the policy pursued by AEG which requires inter alia the exclusion
from the network of all distributors who are qualified for admission but are not prepared to
adhere to that policy.’
The court therefore held that admission was contingent on the distributor’s acceptance, tacitly
or expressly, of the policy of RPM.
Supplier A instructs reseller B not to resell to customers outside the territory in which B is located. B
is reluctant to comply, but does so under duress
The fact that a reseller complies with the instructions of its supplier only under duress does
21
not vitiate its consent for the purposes of Art 81 EC.
Supplier A instructs reseller B not to resell to customers outside the territory in which B is located,
and B continues to deal with A, but does not otherwise comply with the instruction
So we have seen that an agreement for the purposes of Art 81 EC can arise where a distributor
either expressly accepts a restriction of competition imposed by the supplier, or tacitly accepts
it by falling in with the required conduct. A concurrence of wills is established or inferred
from that acceptance. What is the situation where there is no evidence that the distributor
takes steps to comply with the restriction, but it merely continues to deal with the supplier?
Can it be held to have tacitly accepted the restriction?
Here the case-law of the European courts has evolved, resulting in a more rigorous approach.
22
In Sandoz Prodotti Farmaceutici SpA v Commission, the ECJ concluded that where dealers
continued to trade with Sandoz following its issue of invoices with the words ‘export
prohibited’ on them, they were deemed to have accepted that stipulation, giving rise to an
agreement for the purposes of Art 81 EC. The export ban did not constitute unilateral conduct
but formed part of the general framework of commercial relations and was a term to which the
parties adhered.
However, Sandoz may no longer be good law in the light of the judgments of the CFI and ECJ
in Bayer. In that case, the CFI and ECJ respectively had to consider the Commission decision
that Bayer had infringed Art 81(1) EC by seeking to withhold supplies of Adalat to distributors
in Spain and France in order to deter sales to the UK where Bayer sold direct.
The CFI summarised the law relating to the concept of an agreement as follows:
‘71. ... case-law shows that a distinction should be drawn between cases in which an
undertaking has adopted a genuinely unilateral measure, and thus without the express or
implied participation of another undertaking, and those in which the unilateral character of
21
22
Cimenteries CBR v Commission (Cases T-25–26, 30–32, 34–39, 42–46, 48, 50–65, 68–71, 87–88 and 103–104/95)
[1992] ECR II-491; Solatrenz SA v Commission (Case T-149/89) [1995] ECR II-1127 and Trefileurope Sales
SARL v Commission (Case T-141/89) [1995] ECR II-791.
(Case C-277/87) [1990] ECR I-45.
[2007] Comp Law
133
The CFI concluded that the wholesalers had striven to obtain additional quantities of Adalat
and had not acquiesced in Bayer’s policy and that there was no agreement for the purposes of
Art 81(1) EC.
With reference to the Commission’s argument that the maintenance of commercial relations
by the parties sufficed under Art 81 EC, the CFI held that the requirement of a concurrence of
wills meant that the Commission had erred:
‘172. … in holding that the continuation of commercial relations with the manufacturer
when it adopts a new policy, which it implements unilaterally, amounts to acquiescence by
the wholesalers in that policy, although their de facto conduct is clearly contrary to that
policy.’
The ECJ upheld the CFI’s decision, concluding that:
‘141. In that respect, it is important to note that this case raises the question of the
existence of an agreement prohibited by Article [81](1) of the Treaty. The mere
concomitant existence of an agreement which is in itself neutral and a measure restricting
competition that has been imposed unilaterally does not amount to an agreement
prohibited by that provision. Thus, the mere fact that a measure adopted by a
manufacturer, which has the object or effect of restricting competition, falls within the
context of continuous business relations between the manufacturer and its wholesalers is
not sufficient for a finding that such an agreement exists.’
So ‘mere’ maintenance of commercial relations is not sufficient to found a finding of an
agreement in breach of Art 81 EC.
However, attempting to control resellers by means of unilateral instructions carries significant
risk in practice. The reason is that the supplier is generally unable to control whether or not
the reseller expressly or tacitly accepts its instructions. In order to avoid liability under
Art 81 EC, the supplier needs its resellers not to agree to its instructions – but this is the exact
opposite of the desired commercial result.
FROM COMMON INTENT TO CROSS PURPOSES
The third progression addresses the extent to which parties must share the same subjective
intent in order for there to be an agreement for the purposes of Art 81 EC. In particular, this
section addresses the principle elaborated in the UK Court of Appeal judgments in Replica Kit
ARTICLES
the measure is merely apparent ... in particular ... practices and measures in restraint of
competition which, though apparently adopted unilaterally by the manufacturer in the
context of its contractual relations with its dealers, nevertheless receive at least the tacit
acquiescence of those dealers.’
134
[2007] Comp Law
ARTICLES
and Toys and Games, dealing with the extent to which it was necessary that the parties should
actually have foreseen the use that would have been made of their disclosures, as opposed to
that use being merely foreseeable.
The CFI held in Bayer that the necessary ingredient is a concurrence of wills. The CFI
remarked that proof of an agreement having been reached must be founded on:
‘173. … the existence of the subjective element that characterizes the very concept of the
agreement, that is to say the concurrence of wills between economic operators on the
implementation of a policy, the pursuit of an objective, or the adoption of a given line of
conduct on the market.’
However, the extent to which the parties share the same subjective intent can vary, and a party
to an arrangement will very rarely be aware of its partner’s subjective intentions. So in a case
where a distributor tacitly accepts an instruction not to sell outside its territory, its subjective
intent may not be the same as that of the supplier. The supplier may intend to prevent parallel
trade and price arbitrage. The distributor may be motivated by nothing more than the desire
to take whatever steps are required to ensure that it remains on good terms with the supplier
and does not have supplies withheld from it. Subjective intent is therefore a fairly imprecise
concept, and for that reason courts and competition authorities often prefer to look to the
outward manifestation of the parties’ intent.
A transmits pricing information to its competitor B, and both parties intend that B should act on that
information in order to align its prices with A’s and thereby to restrict competition
It is clear that in this situation, the intention is to align prices. The object of the agreement is
to restrict competition and there is an infringement of Art 81 EC.
A and B exchange pricing information at a trade association meeting. C, who is also present, receives
information from B and C, but does not transmit its own pricing information to A or B. It has no
intention of aligning its prices with those of A and B, nor that A and B should align their prices with
its own
Notwithstanding the importance of this concurrence of wills, there are circumstances where
liability appears to arise in the absence of concurrence as to subjective intent – or at least in the
23
absence of evidence to that effect. For example, in Aalborg Portland, the ECJ held that the
fact that a participant at a meeting which had a clearly anti-competitive object did not intend
to be bound by the agreement reached by the other participants at the meeting did not absolve
it of liability for the infringement.
The ECJ does not appear to be saying that this is a strict liability offence. It is still open to a
participant in such a meeting to show that its subjective intent was different from that of the
other participants (although the evidence required, in the form of a public distancing from the
purpose of the meeting, is highly objective). This seems therefore to be an evidential issue.
23
See n 17, above.
[2007] Comp Law
135
A transmits pricing information to its competitor B, but does not intend that B should pass that
information to A’s competitor C
It is here that the judgment of the Court of Appeal in Replica Kit and Toys and Games comes
into play. The OFT had found in two separate cases, relating to replica football kit and toys
respectively, that suppliers had acted as a conduit by which retailers had aligned their
respective retail prices. The OFT had found not merely bilateral vertical resale price
maintenance agreements, but also bilateral or multilateral horizontal agreements between the
retailers. The CAT had upheld the OFT’s decisions, and had set out the following
proposition:
‘659. … if one retailer A privately discloses to a supplier B its future pricing intentions in
circumstances where it is reasonably foreseeable that B might make use of that information
to influence market conditions, and B then passes that information on to a competing
retailer C, then in our view A, B and C are all to be regarded on those facts as parties to a
concerted practice having as its object or effect the prevention, restriction or distortion of
competition. The prohibition on direct or indirect contact between competitors on prices
has been infringed.’
Before the Court of Appeal, the appellants argued that this formulation was too wide: it was
not sufficient for an anti-competitive outcome of the transmission of information from reseller
to supplier to be foreseeable: it was necessary that the reseller should in fact have foreseen the
subsequent transmission of the information to a competing reseller. The Court of Appeal
agreed, although it emphasised that in practice, this distinction did not make a significant
difference – under the circumstances, the retailers must have intended that their pricing
intentions would be transmitted to their competitors via the suppliers.
However, it is important to note that this principle appears to apply only where there is a
legitimate alternative explanation for the transmission of information to an intermediary.
24
In its judgment in Makers, the CAT considered the application of the Toys and Games and
Replica Kit principle, in the context of a bid-rigging arrangement. The OFT had found that
figures submitted by Makers as part of its tender were identical to figures in a schedule faxed
from Rock, one of the other bidders to Asphaltic, a third bidder. The OFT concluded that this
indicated collusion between the parties – either directly or indirectly.
Makers argued that based on the Toys and Games and Replica Kit formulation, in order to
establish an infringement, the OFT must establish that Makers knew that the figures provided
to it by Asphaltic originated from Rock, or that Makers knew that Rock and Asphaltic were
colluding.
24
See n 3, above.
ARTICLES
Subjective intent is still relevant, but because of the difficulty of proving intent from what may
be entirely passive participation at a meeting, intent is presumed from that participation.
136
[2007] Comp Law
ARTICLES
However, the CAT disagreed. It held, at para [100]:
‘This case, by contrast, involves the direct disclosure of pricing information from one
competitor to another. We do not consider it necessary therefore for the OFT to prove
that, in passing the pricing schedules to Asphaltic, Rock knew that Asphaltic would pass
them on to Makers; nor that Makers knew that the figures had come from Rock.’
CONCLUSION
The definition of an agreement is a fundamental one. At first sight, it lacks the complexity and
interest of questions relating to the restriction of competition. Nevertheless, it has been the
subject of some of the most important and interesting judgments and decisions of the past few
years. It is clear that an analysis of the parties’ intentions underpins this entire issue. However,
precisely because of this, and because the parties’ intentions may not be clear to each other or
even to themselves, this is an area where further argument appears inevitable.