On 7 July 2016, the European Commission adopted a decision accepting commitments by 14 shipping liner companies to change their practices concerning announcements of intended price increases for containerised shipping services. The Commission considered that these announcements were anti-competitive and resulted in higher prices for container liner shipping services, thereby harming customers.
In certain circumstances, public price signaling (i.e., unilateral public announcement of future price intentions) may amount to an exchange of sensitive information between competitors in violation of EU competition law. Use of the internet to make public price announcements to customers can make the same price information accessible to competitors as well, with an inevitable risk of price signaling.
Price Signaling – Legal Framework
The Commission’s 2011 guidelines on horizontal cooperation agreements provide that a genuine public unilateral price announcement in general does not constitute a concerted practice under Article 101 TFEU. However, the guidelines further provide that the possibility of finding a concerted practice cannot be excluded where the case presents certain specific facts, such as when competitors announce their prices one by one within a short period of time. Indeed, a public announcement with the possibility of readjustment could be used as a strategic response to a competitor in order to reach a common understanding about the terms of coordination. The circumstances of the case therefore are of crucial importance when assessing price signaling practices.
Recently the Commission raised concerns about public price announcements when it adopted a commitment decision in the maritime sector where it considered the practice as anti-competitive under Article 101 TFEU.
The Commission’s Investigation
In 2011 the Commission raided 14 liner shipping companies which had been making regular public announcements of intended price increases for containerised shipping services (known as General Rate Increases, or GRIs). Through press releases in the specialised trade press and on websites, the GRIs disclosed the intended increase in US dollars per transported container unit, the trade route concerned and the planned date of implementation.
In 2013 the Commission opened formal proceedings against the companies, as it had concerns that:
The announcements, being made three to five weeks before implementation, gave each carrier the possibility to align its GRIs with those announced by other carriers.
The companies were able to amend their originally announced increases in reaction to competitors’ announcements because the original announcements did not bind the carriers.
Customers were unable to rely on the announcements because they provided only partial information about prices and were not binding on the carriers.
The Commission considered that this practice might have led to higher prices for container liner shipping services, thereby harming competition and customers. The Commission concluded that the GRI announcements constituted an exchange of sensitive information which amounted to a restriction “by object” under Article 101 TFEU. These announcements were not associated with efficiencies, as the information announced was not of significant value for customers. Such announcements therefore could not benefit from the exemption available under Article 101(3) TFEU.
In order to resolve the Commission’s concerns, the liner shipping companies offered the following commitments pursuant to Article 9(1) of Regulation (EC) No 1/2003:
The companies will stop publishing and communicating GRIs.
In order for customers to be able to understand and rely on the price announcements, published price figures must be more transparent and include at least the five main elements of the total price, including base rate, bunker charges, security charges, terminal handling charges and peak season charges.
Whilst the carriers are not obliged to announce price changes, future announcements will be binding on the carriers as maximum prices for the announced period of validity.
Announcements must not be made more than one month before the price implementation date.
These commitments will not apply to communications with purchasers that already have an existing rate agreement in force on the route to which the communication refers, nor to communications during bilateral negotiations or communications tailored to the needs of specific identified purchasers.
On 7 July 2016, after a one-month public consultation (market testing), the Commission adopted a formal decision accepting the commitments and making them legally binding. The commitments will be applicable for three years starting from 7 December 2016.
This case enabled the Commission to clarify its position on price signaling.
When making public price announcements, businesses should limit themselves to providing information that is definite, concrete and useful for customers. They should avoid any practice that is indicative of price signaling, such as making vague or non-binding announcements or reviewing price announcements as soon as competitors have made theirs. Internal antitrust compliance programs should deal with the dangers of price signaling in detail. This is a complex area, and legal advice should be taken in cases of doubt.
Geoffroy Barthet also contributed to this article.