Ever since the idea of markets originated, the phenomenon of collusion between the traders of a market has been a cause of concern for the consumers. This concern finally got addressed in the legislations brought forth to curb anti-competitive conducts in the market. Therefore, a very fundamental purpose of all antitrust laws is to prohibit collusion as the paramount offense within its ambit.[1] It is illustrated by Article 101 of TFEU[2] as well as Section 3 of the Competition Act, 2002[3]. The simple rationale behind this is that collusion has severe monopolistic consequences and thereby causes a grave loss to the consumers.
What constitutes collusion must, therefore, be understood at the very outset. Collusion simply refers to the practice of entering into an agreement between two or more firms in a market, aimed at diminishing the degree of competition in that market. As per antitrust law, more often than not, it is a secretive behaviour. Due to its inconspicuous nature, it becomes hard to detect for the competition enforcement agencies. Courts world over have found it difficult to determine a fixed amount of proof required to prove collusion.[4]
Usually, horizontal collusions such as cartels are per se prohibited.[5] This means that once it is established that there was such a collusion, no impact assessment of such behaviour is required to be undertaken. As against that, vertical collusions are examined through a rule of reason. This means that the possible and actual impacts of such behaviour are examined. In India, a horizontal collusion becomes anti-competitive only if it has an appreciable adverse effect on the competition in the market.[6]
To prevail under Section 3(3) of the Competition Act, 2002, a plaintiff must first establish that there was an agreement or a concerted action. The first step in prosecuting collusion is determining the conduct that indicates parallel behaviour. However, parallel behaviour alone is not sufficient for proving collusion. Sometimes, conscious parallelism may appear to be anti-competitive in nature too. However, they are not prosecutable unless they are adjoined with certain ‘plus factors[7]’.[8] It must be proven beyond the fact that the defendants acted in parallel, that they did so pursuant to an agreement.[9] The incidents of such conscious parallelism are much more likely to take place in small, concentrated markets where the downstream trade facilitators tend to be common for all the competitors. Presence of the means of information exchange along with parallel behaviour may even be found together and may also be a plus factor. In such circumstances, can it be, then, concluded that an opportunity to collude along with price parallelism is sufficient to prove collusion?
The Competition Commission of India answered this question in the affirmative in Express Industry Council of India vs. Jet Airways (India) Ltd. and Ors.[10] (EICI case) in the original Order dated 17th Nov. 2015 by stating that though there (was) no evidence of direct meetings, the OPs participated in passive manner as they had the requisite means to access and exchange information through their common agents and circulars[11]. The Order also imposed a total penalty of INR 257.91 Crores. This Order was then reversed by COMPAT in its Order dated 18th April 2016 and remanded to CCI for reconsideration and to record reasons for disagreeing with the Report of the DG that found no collusion. On March 7th 2018, CCI came out with the final Order in the case, reaffirming its original Order of holding the OPs liable for price fixing by collusion of the Fuel Surcharge (FSC), though the quantum of penalty was significantly reduced from INR 257.91 Crores to INR 54.36 Crores. In the final Order, the reasoning was more elaborate in terms of the way the common agents were used to exchange information, and the relevant admissions in the same regard. However, the question that whether a mere existence of the necessary tool(s) for information exchange or collusion can render an entity liable for collusion, remained unaddressed. Though it was proven that the common ‘agents act as a conduit for exchange of information’, the larger reliance was placed only on the fact that OPs had the opportunity to exchange information. It is notable here that the defendants took the defence of conscious parallelism in this case putting the blame on the rise of prices of Aviation Turbine Fuel.
I wish to argue here that the proof of a mere opportunity to collude or to exchange information is insufficient evidence for proving information exchange. Just as the mere possession of a dagger cannot render an alleged person liable for homicide, in the same manner, the availability of requisite tools for information exchange at the disposal of a party alleged of collusion alone cannot place him in an anti-competitive agreement.
This argument is strongly supported by a series of judgements from United States that have drawn the clear jurisprudence on the issue. The Supreme Court of USA has held in Matsushita Electric Industrial Co. v. Zenith Radio Corp.[12] that “antitrust law limits the range of permissible inferences from ambiguous evidence. To. . . . a plaintiff seeking damages for violation of Section 1 [Sherman Act] must present evidence that tends to exclude the possibility that the alleged conspirators acted independently”[13] Evidence merely indicating an opportunity for collusion carries less weight in the hierarchy of proof.[14] Since the Matsushita judgement, many courts have held that communications that do not show more than a “mere opportunity to conspire” are inadequate to prove conspiracy.[15] The Third Circuit in In re Baby Food Antitrust Litigation[16] observed and held that the evidence of opportunities to conspire did not establish conspiracy.[17] Similarly, in Todorov v. DCH Healthcare Authority[18] it was noted that the mere opportunity to conspire alone cannot be used to infer conspiracy.
In Apex Oil Co. v. DiMauro[19], a case with very similar facts as the EICI case that dealt with price fixing, the Court held that a sworn denial of any collusive practice is more than sufficient to shift the burden of proof on the plaintiff to establish that they have colluded and to offer significant probative evidence which tends to exclude the possibility that the alleged conspirators acted independently. The law with regard to opportunity to conspire in US Antitrust Law is settled since the Federal Second Circuit judgement in Weit v. Continental Illinois National Bank and Trust Company of Chicago[20] , where it held that mere opportunity to conspire, even in the context of parallel business conduct, is not necessarily probative evidence. The Order is founded on information that only develops a ‘mere possibility range’[21] and nothing more. The principle of this judgement has more recently been reiterated in Blomkest Fertilizer v. Potash Corp. of Saskatchewan[22].
Therefore, I come to the conclusion that the presence of a mere opportunity to collude is insufficient to prove that there was a conspiracy. It amounts to inadequate evidence and a higher degree of probative evidence must be presented in order to prove collusion alongside parallel behaviour.
Endnotes:
[1] Robert H. Land & Howard P. Marvel, The Three Types Of Collusion: Fixing Prices, Rivals, And Rules, 2000 Wisconsin Law Review 941 (2000).
[2] Articles 101 to 109 of the Treaty on the Functioning of the European Union (TFEU) contain the substantive legal provisions relating to competition in the European market. Article 101 is the first Article dealing with competition law and the first thing it talks about it is anti-competitive agreements or collusion.
[3] Likewise, Section 3 is the first substantive provision in the Indian competition law statute and it prohibits collusion too.
[4] Antitrust Law Developments 5 (Jonathan M. Jacobson and Ors. ed.) 2016, ABA Section of Antitrust Law, ABA Publishing.
[5] In EU, Art. 101(2) of TFEU. In India, S. 3(3) of the Competition Act, 2002. In USA, several cases have rendered the classes of vertical agreements per se anti-competitive, although the legislative provision in the Sherman Act has made no express mention in this regard. For reference, see United States v. Socony Vacuum Oil Co., 310 US 150, 210 for price fixing; United States v. Addyston Pipe & Steel Co., 85 F. 271 aff’d, for market allocation.
[6] The language used in S. 3(3) is shall be presumed to have appreciable adverse effect whereas in S. 3(4) it is if such agreement causes or is likely to cause an apprerciable adverse effect.
[7] See William E. Kovacic et al., Plus Factors and Agreement in Antitrust Law, 2011 Michigan Law Review, 110 3, 393-436.
[8] The Economics of Antitrust Injury and Firm-Specific Damages 228 (Kevin Scott Marshall ed.) 2008, Lawyers & Judges Publishing Company. See also Continental Ore Co. v. Union Carbide & Carbon Co. 370 U.S. 690.
[9] Theatre Enters v. Paramount Film Distribution Corp., 346 U.S. 537
[10] Case no. 30 of 2013. Available at http://www.cci.gov.in/sites/default/files/302013.pdf.
[11] Ibid. ¶ 121, pg. 46.
[12] 475 U.S. 574 (1986).
[13] Ibid. at 588.
[14] Supra note 4, pg. 14. See Proof Of Conspiracy Under Federal Antitrust Laws 76, ABA Section of Antitrust Law, ABA Publishing 2008.
[15] Williamson Oil Co. v. Philip Morris USA, 346 F.3d 1287 (11th Cir. 2003)
[16] 166 F.3d 112 (3rd. Cir. 1999)
[17] Id.
[18] 921 F.2d 1438 (11th Cir. 1991)
[19] 641 F. Supp. 1246 (S.D.N.Y. 1986)
[20] 641 F.2d 457
[21] Id. at 477.
[22] 203 F.3d 1028 (2000)
This post has been authored by Prakash Vaibhav, a graduate of the Hidayatullah National Law University, Raipur.
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