Competition Law in the Online Environment
European Court hands down preliminary ruling on anti-competitive concerted practices in the context of online selling platforms - Case C‑ 74/14, Eturas and Others
Businesses who participate in online booking platforms should be alert to the possibility that they can be found in breach of competition law without taking any active steps to collude. This was confirmed recently by the Court of Justice of the European Union (CJEU) which handed down a preliminary ruling on 21 January 2016 in relation to a reference from the Lithuanian Supreme Administrative Court on whether a system for capping the level of discount within an online travel booking system constituted a concerted practice contrary to Article 101 TFEU.
Background
The E-TURAS system is an online travel booking system allowing travel agencies to offer travel bookings for sale. In June 2012, the Lithuanian Competition Council (LCC) found that 19 travel agencies had taken part in anti-competitive practices through this E-TURAS system. The travel agencies had received a message from the director of the online booking system on the internal E-TURAS mailbox system asking them to vote on the appropriateness of reducing the online discount rate from 4% to 1%-3%. This was followed by a message from the system administrator announcing the discount reduction. The message stated:
Following an appraisal of the statements, proposals and wishes expressed by the travel agencies concerning the application of a discount rate for online travel bookings, we will enable online discounts in the range of 0% to 3%. This “capping” of the discount rate will help to preserve the amount of the commission and to normalise the conditions of competition. For travel agencies which offer discounts in excess of 3%, these will automatically be reduced to 3% as from 2:00 pm. If you have distributed information concerning the discount rates, we suggest that you alter that information accordingly.
Following the dispatch of this message, technical modifications were made to the E-TURAS system which required travel agencies to take additional technical steps to grant customers a discount greater than 3%.
Findings of the LCC
On the basis that the travel agencies which did not express any objection could reasonably assume that other users would also limit their discounts to the maximum of 3%, the LCC considered that this amounted to the travel agencies informing each other of the discount rates they intended to apply in the future and therefore indirectly expressing their common intention with regard to their future conduct on the relevant market. The LCC considered that this behaviour constituted a concerted practice in breach of Article 101 TFEU and held that although E-TURAS was not active on the market in question, it had played a role in facilitating that practice. This finding by the LCC was despite the fact that some of the travel agencies involved claimed not to have had any knowledge of the restriction, some did not change the actual discount rates applied and others did not sell any travel packages at all via the E-TURAS system during the relevant period.
Standard of Proof
The first question considered by the CJEU related to whether the LCC could presume that the travel agencies were aware or ought to have been aware of the message. The CJEU referred to previous decisions where it had held that passive modes of participation in an infringement, such as the presence of an undertaking in meetings at which anti-competitive agreements were concluded without that undertaking clearly opposing them, are indicative of collusion capable of rendering the undertaking liable under Article 101 TFEU. Furthermore the CJEU noted that there is a presumption of a causal connection between a concertation and the market conduct of the undertakings involved. The national court was bound by these principles. However the question as to whether the mere dispatch of the message could constitute sufficient evidence to establish that the travel agencies were aware of its content related to the assessment of evidence and to the standard of proof, both of which were governed by national law, and was not intrinsically linked to the concept of a concerted practice.
The CJEU held that the presumption of innocence prevented the referring court from inferring from the mere dispatch of the message that the travel agencies concerned ought to have been aware of the content of that message. However, the CJEU also considered the principle of effectiveness which required that an infringement of EU competition law could be proven not only by direct evidence but also through indicia, provided that these indicia were objective and consistent. Therefore the presumption of innocence did not prevent the referring court from considering that the dispatch of the message could, in the light of other objective and consistent indicia, justify the presumption that the travel agencies concerned were aware of the content of that message as long as the travel agencies had the opportunity to rebut it. The undertakings could rebut the presumption by proving that they did not receive it, that they did not look at the section in question or did not look at it until some time had passed since that dispatch.
Concerted practice?
The CJEU then considered the question as to whether it could be presumed that the travel agencies who had not objected had participated in a concerted practice. The CJEU held that by virtue of the technical restriction imposed, the travel agencies could be regarded as having tacitly assented to a common anti-competitive practice and this would justify a finding of concertion. This was despite the fact that the restriction did not prevent the travel agencies from granting higher discounts to their customers but required them to take additional technical steps in order to do so.
The CJEU did note that in addition to the participating undertakings concerting with each other, the concept of a concerted practice also implies subsequent conduct on the market and a relationship of cause and effect between the two. A travel agency could rebut the presumption that it participated in the concerted practice by proving that it publically distanced itself from that practice, by for example sending a "clear and express objection" to the system administrator or by reporting it to the administrative authorities. A travel agency who could show "systematic application of a discount exceeding the cap" might also be able to rebut the presumption.
Comment
The fact of passive involvement in an anti-competitive agreement or concerted practice is well-known. However, the application of this principle in the online environment poses new challenges for businesses. The effect of the CJEU decision is that members of an online booking platform who receive a message on an internal mailbox regarding a cap on the level of discounts followed by the imposition of a technical restriction on these prices can be found to be colluding in breach of EU completion law. This is the case even where those undertakings are free to charge higher prices or offer greater discounts but must take additional steps in order to do so.
The CJEU's consideration of the presumption of innocence tempers the potential harshness of this finding and companies can rebut the presumption that they tacitly colluded. A more difficult question yet to be considered is whether the presumption of collusion could be rebutted by companies who register their objection but nevertheless continue to apply the discount, potentially not out of a conscious decision but by failing to take the additional steps to counteract the technical restriction imposed.
Businesses who participate in online booking platforms should monitor internal mailboxes carefully, registering an objection to any internal messages which in any way suggest or dictate future market conduct.
For further information please contact our EU, Competition & Procurement team.
Date published: 05 February 2016.