Court of Justice rules on the evidence needed to show a ‘concerted practice’ in the context of online platforms: Eturas and al v Lietuvos Respublikos konkurencijos taryba, case C-74/14, judgment of 21 January 2016

Posted by Chantal Lavoie on 15 February 2016

The Court of Justice (the Court) ruled on 21 January 2016 on a request for a preliminary ruling from the Lithuanian Supreme Administrative Court with respect to proceedings between Eturas and 19 travel agencies on the one hand and the Lithuanian Competition Council (Competition Council) on the other hand relating to a decision fining Eturas and 30 travel agencies for taking part via the E-TURAS online booking system in an anticompetitive practice contrary to Article 101 TFEU. 

The ruling is of particular interest as it considers the application of the evidentiary standard needed to prove a ‘concerted practice’ in the context of an e-commerce platform.    Whilst some adaptations were required as explained below, the Court relied on existing case law in the ‘brick and mortar’ space to provide guidance on the kind of evidence to be adduced to show whether Eturas and travel agencies had engaged in a concerted practice.  The Court ruled that the dispatch alone by the system administrator Eturas of a message to travel agencies regarding the maximum discount to be applied to clients for sales over its online platform is not sufficient evidence of a concerted practice.  However, evidence that the message was received without the travel agency objecting or distancing itself could implicate it in illegal price fixing.

Background

Eturas owns and administers in Lithuania an online travel booking system called E-TURAS.  Several travel agencies have been granted an operating licence by Eturas to offer travel bookings through that system.  The Competition Council received information from a leniency applicant that the travel agencies using the E-TURAS system were coordinating the discount rates offered to their clients on bookings made through the system.  The investigation revealed that Eturas had sent an email to several travel agencies participating in the system asking to vote on the appropriateness of reducing the online discount rate from 4% to 1%-3%.  A few days later, Eturas sent a message, through the internal messaging system of E-TURAS, informing travel agencies that going forward Eturas will cap discounts at 3% for bookings made through its system; this was followed by a technical restriction which the system applied to limit the discount rate to 3%.  As a result, discounts offered by travel agencies above 3% were automatically reduced by the system to 3%.  Subsequently, the website of several travel agencies advertised online discounts of 3%.  It appears that, whilst the travel agencies were not prevented from offering online discounts above 3%, additional technical steps had to be taken to make this possible.

As a result of its investigation, the Competition Council fined Eturas and 30 travel agencies for participating in an anticompetitive practice consisting in coordinating discount rates by applying a cap of 3% through the E-TURAS online booking system.  The Competition Council considered that (1) the infringement arose from the moment the message appeared on the E-TURAS online booking system and the discount cap was implemented; and (2) it implicated all those travel agencies using the E-TURAS system which had failed to object to the message.  The decision was appealed to the Vilnius District Administrative Court which upheld the grounds for appeal in part and reduced the fines.  The matter was then appealed to the Lithuanian Supreme Administrative Court which stayed the proceedings in order to obtain guidance from the Court.

Findings of the Court

The ruling of the Court focuses on the concept of a concerted practice under Article 101 TFEU and more precisely on the evidentiary burden and standard of proof to be applied by a national court in applying Article 101 TFEU.   The concept of concerted practice is based on three elements, namely evidence of concertation between parties; conduct of the parties on the market; causal connection between the two.  These are considered in turn below.  The other aspect to finding an infringement of Article 101 TFEU – whether the concerted practice has the object or effect of preventing, restricting or distorting competition – is not considered in this ruling. 

Prior to addressing the evidence required to show a concerted practice, the Court also touches on a few important preliminary issues regarding the relevant rules applicable to the evidentiary standard and standard of proof.  The Court held that this is a matter for each Member State’s legal order, with the caveat established under previous case law that the national rules applied cannot be less favorable than those governing similar domestic situations (principle of equivalence) and should not make it excessively difficult or impossible for parties to exercise their rights under EU law (principle of effectiveness).   The Court was guided throughout this ruling by these principles.

1.  Concept of concerted practice: concertation between undertakings

Relying on previous case-law, the Court ruled that the existence of a concerted practice can be proven by direct evidence or if can be inferred from consistent and objective circumstantial evidence. 

1.1  The dispatch of an electronic message alone is insufficient evidence but…

The Court clarifies that the question whether the dispatch of a message alone is sufficient evidence that the travel agencies were aware, or ought to have been aware, of the content of the message is a question of evidentiary standard to be determined under national law.  However this determination under national law must take into account both the presumption of innocence enshrined under EU law and the principle of effectiveness.  This means that the national court cannot conclude that the travel agencies knew or ought to have known of the content of the message solely from the dispatch of the message.  Nevertheless, EU case law does recognise that a concerted practice can be proven by indirect evidence and accordingly the principle of effectiveness requires a national court to allow such indirect evidence.  As a result, the Court held that the dispatch of a message combined with other objective and consistent indicia does give rise to a presumption that the travel agencies knew or ought to have been aware of the content of the message. 

1.2  Grounds for rebutting the presumption

The Court makes clear that, where an electronic message providing for a restrictive practice to be put in place is dispatched to several travel agencies, it can be inferred from the dispatch of the message and other consistent and objective indicia that the travel agencies were aware of the message.  The Court suggests that travel agencies can nevertheless rebut the presumption that they were aware of the message by showing that, for example:

(i) the message was not received; or

(ii) the party did not “look” at the relevant section or did not look at it “until some time had passed” since the date of dispatch. 

The examples provided by the Court are expressly stated as non-exhaustive and presumably other arguments could also be put forward.  In fact, the Court recalls that, in line with the presumption of innocence, national courts must also allow parties to rebut the presumption by means which do not impose an excessive or unrealistic burden on parties.  Whilst the Court does not discuss these examples in more detail, it is likely that receipt of a message by any employee of the travel agency, regardless of her/his position or role, would amount to receipt by that travel agency.  Of specific relevance to e-commerce platforms, the Court also suggests that travel agencies which did not consult the ‘notices’ section of the E-TURAS booking system where the message announcing the discount cap was posted - or did so at a later stage - could rely on this argument to rebut the presumption that they were aware of the content of the message.  It is not clear however how consultation of the ‘notice’ section “until some time had passed” could exonerate a travel agency, unless the consultation occurred at a very late stage, say once the investigation by the Competition Commission had started. 

2. Causal connection between concerted practice and conduct on market

The concept of concerted practice also requires evidence of a causal connection between the participation of the parties in a concerted practice and the market conduct of the undertakings participating in the practice. There exists under EU law a presumption that, where parties remain active on that market, these parties are presumed to take account of the information exchanged with their competitors to determine their conduct (also referred to as the ‘Anic’ presumption from Commission v Anic Partecipazioni ).  The Court makes clear in its ruling that national courts are required to take this EU presumption into account in applying their national rules on evidentiary standard.  As previously decided also in T-Mobile Netherlands and Others, this presumption forms an integral part of the concept of concerted practice and therefore is not related to the assessment of evidence which is governed by national law.   

The Court stated that the travel agencies may rebut the presumption of a connection between their market conduct and their participation in the concerted practice by several means:

 (i) public distancing by means of a “clear” and “express” objection sent to the administrator Eturas; or

 (ii) reporting the practice to the administrative authorities; or

(iii) other evidence, such as evidence of a “systematic application of a discount exceeding the cap in question”. 

As regards the means of public distancing, the Court draws a distinction between public distancing from illicit meetings and public distancing from illicit online communication.  Under the existing case-law of the Court, public distancing - in the context of a physical meeting to discuss illicit coordination -must be made to all competitors attending the meeting.  In the circumstances of this case, the travel agencies were not able to inform all recipients of the message that it objected to its content.  Indeed, the message was sent by Eturas through its internal messaging system without the recipients knowing who else received the message.  

Interestingly, these arguments for rebuttal are unlikely to be of much support to those travel agencies not having taken any action with respect to the message sent by Eturas but reported not to have sold a single package to clients over the E-TURAS booking system after the discount cap was implemented.  Indeed, if they were aware of the message and continued to offer their services through the E-TURAS system, this may suffice to show their participation in an illicit concerted practice.  As the practice is likely to qualify as an ‘object’ restriction, then these travel agencies could be liable under Article 101 TFEU even though they did make any actual bookings through the E-TURAS system.  Indeed the courts have repeatedly held that, in the context of ‘object’ restrictions, it is not necessary to show the actual effects on the market (see T-Mobile Netherlands and Others ; and Dole Food and Dole Fresh Fruit Europe v Commission ). 

Commentary

The Court’s ruling is of interest for several reasons, notably:

1. The Court confirms that a unilateral online message can amount to a concerted practice under Article 101 TFEU, assuming there is tacit approval of its content from the parties receiving the communication.  This highlights the risks for businesses of inaction when receiving messages which may also have been sent to other competitors and which touches on sensitive business practices.

2. The message triggering the concerted practice was sent by a third party – not by a competitor.  Nevertheless, the message was received by competing travel agencies and its content was aimed at coordinating the pricing behavior of the travel agencies.  Whilst the Court did not express views on this issue, it seems implicit from its ruling that the horizontal nature of the pricing coordination arising from the message was not affected by the fact that the messenger was a third party.  Eturas was presumably viewed as a third party facilitator, comparable to the role played by AC-Treuhand in the recent Court case in AC-TreuhandIn this latter case, AC-Treuhand was not active on the market where the practice took place but it was found to have facilitated the practice and therefore to have participated in the illicit practice.

3. The Court confirms its previous finding in T-Mobile Netherlands and Others and extends it to the online world: a single (online) message to competitors can suffice to give rise to an illicit concerted practice.

4. In the specific context of internal messages sent to users through an online system, the Court has made some needed adaptations to the means for rebutting the presumption of causal connection between participation in a concerted practice and the parties’ conduct on the market.  Indeed the Court accepts in its ruling that, where the anti-competitive act arose in the context of an online message and the recipients are not known to each other, a “clear” and “precise” distancing to the administrator would suffice. This is of course an exception to the existing case law of the Court in the ‘brick and mortar’ space.  Indeed, the Court has held on several occasions that proof of public distancing from anticompetitive meetings must be assessed by reference to the competitors’ perception, such that “the undertakings must demonstrate that it had indicated to its competitors that it was participating in those meetings in a spirit that was different from theirs” (see Total Marketing Services v Commission, at paragraph 20).  Arguably, informing only the administrator and not the competitors would fall short of this concept of ‘public distancing’ which must be perceived as such by the competitors participating in the concerted practice.

5. The ruling provides some valuable tips for users of online platforms in reviewing their compliance programmes. 

  • The case is a reminder that inaction poses a clear risk for online businesses.  Staff should be trained to react to incoming messages and exchanges of emails and be alert to the type of content requiring attention and escalation.  As we know, failure to react to a single message can be a costly mistake.
  • Businesses should also take this opportunity to review their arrangements with platform administrators or other third parties.  Communication from/with the systems administrator should be monitored and screened by compliance-trained staff.  One should also consider from a risk perspective whether the system administrator can override your actions, act on your behalf or implement measures unilaterally which affect the way you carry out business? Have checks been put in place to oversee the administrator’s actions?
  • Evidence is key to rebutting the presumption of participation in a concerted practice.  In the fast moving e-commerce sector where indirect contacts are made easier and more quickly, it is critical to keep track of communications from/with third parties, suppliers or competitors; to identify the channels of communication for receiving messages (e.g. posting of system notices; pre-defined group emails; chats; blogs); to know when communications contain sensitive information; to know how to react and to do so promptly and clearly.
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