Risks of one shady meeting are laid bare in UK watchdog's court win
9 October 2017. By Lewis Crofts.
One meeting with fellow industry members is enough to get you fined for an antitrust breach. That's the lesson from the UK competition authority's successful defense of a court case last week.
Antitrust investigators will retain a wide net to catch these kinds of interactions, leaving one corporate executive to regret not having been able to 'stick a finger up' to rival companies to distance himself more clearly from their nefarious activities.
On Friday, the Competition Appeal Tribunal upheld a decision against Balmoral, a maker of galvanized water tanks, saying it was guilty of illegally sharing sensitive information.
The regulator was quick to make mileage out of the ruling, saying it sent a "crucial message to businesses about compliance with competition law."
It shows that even if a company manages to avoid getting dragged into a full-blooded cartel, it's still not in the clear. Balmoral's executive was considered to have hung around too long at a meeting designed to recruit him to the cartel, and this meant he still shared enough information to break the law.
This will be tough to swallow for some companies, who will see the judgment as disconnected from the reality of doing business. And some lawyers might claim it gives too much power to enforcers to cast suspicion on any kind of interaction.
In a statement, Balmoral said its legal team had identified several faults in the judgment — over the legal approach to a single meeting and the context of the contacts — and that it was considering a further legal challenge to the Court of Appeal.
Still, for now, the ruling enforces anew — and possibly extends — a hard line that has been emerging in jurisprudence in this field in recent years.
Over decades, lawyers have billed countless hours schooling companies and their trade associations not to step out of line when in meetings. Sure, talk about the challenges facing your industry, but don't reveal price intentions or commercial strategy.
As if they needed it, last week's judgment gave them a timely reminder.
"Because executives meeting together for a legitimate industry purpose must be firmly discouraged from giving in to any temptation they may face to slip into illegitimate discussion of prices . . . the case law defines the concept of concerted practice in price exchanges so broadly."
The court accepted that Balmoral's executive — Allan Joyce — had gone to the meeting to "put an end to unwanted contact" from rivals, who were trying to recruit him to the full cartel. But Joyce's fault lay in hanging about after he had communicated that message, and lapsing into talking about prices.
But for the Balmoral executive, it was an impossible situation.
"I cannot just walk in there and almost put up my finger and walk out the door," Joyce said during the cross-examination, arguing that he still had to deal with the other executives on the market and at trade fairs. Indeed, he had tried to recruit one of them.
So, there's another clear message from the ruling: it doesn't matter what your intentions are when you walk into the meeting. It's what the arrangement is when you leave that matters.
And for Balmoral and the others, this was reduced uncertainty and a "greater ability to predict what prices [the company] would quote to customers in the future," according to the ruling.
Balmoral argued that just one meeting wasn't enough to find it guilty of an antitrust breach. Investigators needed to look at the market and the meeting's context to decide if a single meeting could really change the course of a business.
In its judgment, the tribunal falls back on a well-known case — related to Dutch telecoms markets — where just one meeting was considered sufficient to impose an antitrust fine.
And here lies the clever framing of the case by investigators.
The Competition and Markets Authority wasn't claiming that this meeting was tantamount to a cartel to divide up contracts between manufacturers. That might have needed more than one meeting.
Rather, they argued there was already a cartel on the market, competition was limited, and the mere exchange of pricing information was enough to reduce uncertainty and change business conduct.
The case law on information exchange is sparse. One EU ruling refers to the Dutch instance of a single meeting between telecoms executives discussing long-term strategy; and a second concerned banana importers talking about the weather every week.
The London tribunal situated Balmoral's case somewhere between the two. Given the way the water-tank market works, this one meeting was enough to have an impact.
"A single indication as to future pricing may therefore affect a material number of bids and a material value of potential work," it said.
The tribunal also rejected several attempts by Joyce to argue his way out of it.
He said he had no knowledge of his company's pricing practices and that responsibility lay elsewhere in the company. And he also said that the pricing information was too historic or too generic to help any rivals.
Those attempts all failed, seemingly on the strength of factual evidence to the contrary.
If there were any doubts about what executives can and can't get away with, this ruling has cleared up many.
"Exchanging competitively sensitive confidential information, even at just one meeting, is itself a breach of competition law," the Competition and Markets Authority said. "We welcome today's judgment for upholding our view and making this clear in law."
Balmoral's legal team seems confident of a possible appeal.
"We are now considering all our options, including a possible appeal to the Court of Appeal. Our legal team has identified a number of areas in which the CAT judgment could be challenged, including a misreading of the existing case law on single meeting conduct, a failure to put the meeting in its proper context, and a failure to assess the evidence given by the CMA's own witness, which was helpful to Balmoral," the company said in a statement.
The case number is: 1277/1/12/17.
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