Ian Giles: Richard, what I really wanted to talk to you about today is the risks that companies face in competition law investigations. We have heard a lot about the object box and the way that authorities are able to prosecute companies without needing to show anti-competitive effects from agreements. Do you think that the law is being applied fairly? What does the object box mean to you?
Richard Whish: Well the object box, this derives from Article 101 of the Treaty and the UK equivalent which is the Chapter I prohibition and as you will be aware these provisions prohibited agreements that have as their object or the effect of the prevention, restriction or distortion of competition. There is very clear law now, that goes back fifty years which establishes if an agreement restricts by object then the competition authority or a claimant in litigation does not have to undergo the additional burden of proving the agreement restricts competition by effect. So, if you like, this makes it much easier for the authority or the claimant to establish liability.
Ian Giles: Do you feel, over the cases that you have seen through the years there have been obviously cases involving very clear cut price fixing, bid rigging, there has been a very high profile trucks investigation recently with very significant fines over 3 billion euros, but some of the cases where the object infringement has been used, have been nearer what many considered a grey area. We had two years ago what was seen as a landmark decision from the European Courts in Cartes Bancaires where the courts seen to be trying to rein in the Commissions approach. Do you feel that’s something that’s materialised?
Richard Whish: Well, let’s talk about Cartes Bancaires itself first, then we can come onto what’s happened since. But over the years, certainly there were plenty of cases that established that, if you like, hard-core obvious cartels, price fixing, market sharing, customer allocation....it was established pretty early in EU that these agreements restricted competition by object. But then over the years, there have been other cases, sort of a systematic reduction of beef processing capacity in Ireland, beef industry developments society case, some cases on the exchange of information and in some of these cases the Court of Justice concluded that there was a restriction of competition by object and this gave rise to a sense that the object box, if that’s what you want to call it, a box containing agreements that restrict competition by object, its seen to be inexorably getting bigger and bigger and bigger. The interesting thing about the Cartes Bancaires judgment of 2014, is that for the first time ever the Court of Justice actually came to the conclusion that something that the Commission considered restricted competition by object actually did not do so. So in a sense, I see that case as, yes, beginning to not so much rein in the law but to establish clear principles for establishing whether there’s a restriction of competition by object. Very good judgement I think, a very important paragraph is paragraph 58 that says that the concept of the restriction by object is one that should be construed restrictively.
Ian Giles: Richard, one of the cases I was following closely on this whole point about how the extent of evidence an authority needs to make out infringement was the investigation on the bananas sector. Now the defendants in that case made a lot of the fact that the information exchanges which occurred, they said were incapable of affecting competition law, because they related to price setting at a level above the price which was actually passed onto customers. Did you feel that that case was an example where the Commission may have stretched the legal rules in their favour?
Richard Whish: I have to say with the bananas case, I myself, I never had any doubt that it was a restriction of competition by object and the reason I say that, is, well to begin with of course it predated the Cartes Bancaires judgements anyway. So CB doesn’t really effect our analysis but secondly, let’s remind ourselves what was going on, three major banana producers over a period of two years and 10 months, talking to one another every week, on two occasions - on a Wednesday and a Thursday - about their perception of the market, their perception future development, trends in the sector and also telling each other what they had quoted their customers that Thursday morning for the banana price. To me in every way that feels like an object restriction.
Ian Giles: And the burden in those cases is on the companies to really show that those exchanges, even in their legal and economic context did not meet…
Richard Whish: Well there are two ways of arguing a case like that. One is to say that we are not restricting competition whether by object or effect. The other thing is to say if we are restricting competition there’s an economic efficiency associated with what we are doing. Now, companies for understandable reasons are reluctant to run those arguments but in so far as the bananas producers were saying, there’s something difficult about bananas that requires us to know future trends in order to balance our production and our distribution, its a complicated product, to be honest that sounds to me like an efficiency justification which they never attempted to run.
Ian Giles: Another case which is very recent development, and I think interesting, is the liner shipping investigations. Now this goes directly to the idea that companies public price matching, announcements to their customers of future price intentions can over a period of time when looked at together amount to a competition law infringement. Because, at the same time as the customers, it send a signal to competitors. The Commission ultimately backed down in this case, or at least agreed a settlement rather than pursuing an infringement decision, but do you think this is an area where we could see future activity?
Richard Whish: Well, we have seen past activity, not only in this case but the Competition Commission, now the CMA’s investigation into aggregates, which looked at this under a different legal provision. Admittedly the Dutch looked at it in mobile telephony. It is an issue and I have no doubt it will come up again in the future. I think it’s a fascinating subject. Query, can price signalling to one’s competitors through one’s customers, could that ever amount to an infringement of Article 101? I have always felt with this case, I can see the theory of harm, I can see how this kind of signalling behaviour might facilitate price parallelism. Does it follow that Article 101 is being infringed? And of course the one cannot necessarily lead to the other.
Ian Giles: One final question, a case which I know that you followed quite closely, but it is always going to be of interest to clients, was the Telefonica/Portugal Telecoms case. But this was the case where, parties had agreed not to compete with each other and in the contract had specifically made that agreement, which appears anti-competitive, limited to the extent it is in breach of applicable law. Is it possible to contract out of a competition law infringement?
Richard Whish: Clearly the answer is no. It’s a highly unusual case in which Portugal Telecom and Telefonica are dissolving a Brazilian joint venture for mobile telephony and as an ancillary restraint agree not to compete with one another in the Iberian Peninsula to the extent permitted by law. And I think we all know that in the circumstances of that case it’s probably a phrase that was inserted late at night when the deal was about to be signed, and of course it doesn’t provide a defence.
Ian Giles: And that is a complex issue which we often have to deal with depending on the law of the contract, that is whether it is severable, and whether there is something obvious that can replace it. Thank you very much Richard, it’s been very interesting.