ECJ tightens antitrust liability for information exchange

The ECJ (C-298/22) has recently set strict standards for the permissible exchange of information between companies. As a result, companies are now even more faced with the question: What am I still allowed to talk about with other companies? What is still permissible networking and at what point does the exchange of business-related information constitute a restriction of competition and therefore a breach of antitrust law?

The exchange of information by Portuguese banks

The ECJ had to rule on a referral from the Portuguese Competition Court. The case concerned 14 Portuguese banks that had exchanged non-public information on their business conditions and the amount of loans granted in the previous month for more than ten years. The antitrust authority had punished this with a fine of 225 million euros. The case ended up before the Portuguese Court of Competition, Regulation and Supervision. It wanted to know from the ECJ whether the ban on cartels in Art. 101 TFEU precludes the classification of this exchange of information as a restriction of competition by object. If the conduct qualified as a restriction of competition by object (and not merely “by effect”), this would constitute a violation of the prohibition of cartels without the need to further determine whether and what harmful effects the conduct had on competition.

The ECJ affirms a restriction of competition by object

The ECJ considered the banks’ conduct to be a restriction of competition by object within the meaning of Art. 101 TFEU:

“An exchange of information which, even if it does not formally appear to be in pursuit of an anti-competitive object, cannot, in view of its form and the context in which it took place, be explained otherwise than by the pursuit of an object contrary to one of the constituent elements of the principle of free competition, must […] be regarded as a restriction by object.”

The prohibition of cartels in Art. 101 TFEU prohibits practices, decisions by associations of undertakings and concerted practices which may affect trade between Member States and which have as their object or effect the prevention, restriction or distortion of competition within the EU. In the case of a restriction of competition by object, it is therefore not necessary for the conduct to actually affect the market.

The ECJ considered this to be the case. In view of the form of the exchange of information between the banks and the context in which it took place, it could only have had a purpose contrary to free competition.

No actual coordination of the parties involved required

According to the ECJ, it is also not necessary for the parties involved to have actually coordinated their behavior in order to restrict competition by object. Rather, it is sufficient for companies to receive information that is confidential and strategic and provides them with indications of how the other market participants might behave in the future. It can then be assumed that the parties involved are tacitly coordinating their market behavior:

“Therefore […an exchange of information must be regarded as having characteristics such as to associate it with a form of coordination between undertakings which is in itself harmful to the proper functioning of normal competition where its content relates to information which, whether sensitive or confidential, is likely, in the context in which that exchange takes place, to lead the parties to the exchange, if they are sufficiently active and commercially reasonable, to behave tacitly in the same way in relation to one of the parameters on the basis of which competition arises in the relevant market.”

Information must be confidential and strategic

According to previous case law, an exchange of information is harmful – measured in terms of content, context and objectively pursued objectives – if it relates to information that leads to a likelihood of coordination. It is irrelevant whether the information exchanged is sensitive or confidential. It is also sufficient that the information makes it possible to eliminate uncertainty about the future market behavior of the other market participants by being both confidential and strategic in nature.

The ECJ defines the term “strategic information” broadly. It includes:

• Information that – possibly combined with already known information – can provide insight into the intended strategy of some parties with regard to one or more competition parameters,
• all data not already known that can reduce uncertainty about future behavior with regard to individual competitive parameters of the other participants,
• current or past information, if future behavior can be inferred, and
• Information on individual parameters (e.g. HR orientation) that do not necessarily have to be relevant to the overall strategy.

The frequency of the exchange of information does not initially play a role

The ECJ also sets the bar low with regard to the frequency of the exchange of information. There does not have to be frequent or regular communication between the companies involved in order to assume a restriction of competition. Even a one-off exchange could constitute a restriction of competition by object. However, the frequency of the exchange of information – as well as the duration, specific effects or whether only individual parameters are affected – is certainly relevant in terms of increasing or reducing the fine.

Recommendations for practice

Companies should be extremely cautious about sharing non-public information. An exchange of information can also constitute a restriction of competition subject to a fine if it does not originate from the highest management level. In principle, it is always a case-by-case assessment. However, even an exchange at networking events of individual specialist departments such as HR or marketing is critical. This is because the exchange of information on a single strategic parameter may be sufficient to assume a restriction of competition. It is not necessary for larger parts of the corporate strategy to be disclosed. Companies should also be particularly cautious in the context of cooperations and joint platforms.

From a compliance perspective, companies should adapt their employee training and sensitize all employees to this topic.