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Hub-and Spoke arrangements – ODUDU – December 2019 OECD discussion

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This presentation by Okeoghene Odudu, Senior lecturer, Oxford University, was made during the discussion “Hub-and-spoke arrangements” held at the 132nd meeting of the OECD Competition Committee on 4 December 2019. More papers and presentations on the topic can be found at oe.cd/hsa.

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Hub-and Spoke arrangements – ODUDU – December 2019 OECD discussion

  1. 1. Hub-and-spoke arrangements in EU competition law Okeoghene Odudu Faculty of Law, University of Cambridge December 2019: OECD roundtable
  2. 2. Legal basis To establish an infringement of Article 101 it is necessary to show that there is: 1.an agreement or concerted practice 2.with the object or effect or restricting competition (harm) 3.that is not outweighed by benefits identified under Article 101(3) TFEU
  3. 3. Legal basis The legal basis for dealing with information exchange is developed in the horizontal context. Here two propositions are established: 1. There is an obligation of independence 2.Independence is not compromised by taking account information about a competitor, as long as that information is obtained in an authorised manner
  4. 4. First proposition ‘the concept inherent in the provisions of the Treaty relating to competition [requires] that each economic operator must determine independently the policy which it intends to adopt on the common market including the choice of persons and undertakings to which he makes offers or sells.’
  5. 5. First proposition ‘any direct or indirect contact between such operators, the object or effect whereof is either to influence the conduct on the market of an actual or potential competitor or to disclose to such a competitor the course of conduct which they themselves have decided to adopt or contemplate adopting on the market.’
  6. 6. Second proposition “it is correct to say that this requirement of independence does not deprive economic operators of the right to adapt themselves intelligently to the existing and anticipated conduct of their competitors”
  7. 7. A C A discloses information to C C does not reject that information Anic presumption: C cannot fail to take the information into account. Intention is implicit because it is not normal to disclose strategic information to a competitor.
  8. 8. A C B Manufacturer (upstream) Retail (downstream)
  9. 9. A C B The Problem A discloses information to C A discloses information to B Intention/harm is implicit from the type of information Intention/harm not implicit from the type of information
  10. 10. A C B The Problem A discloses information to C Intention/harm is implicit from the type of information right to adapt themselves intelligently C does not reject that information
  11. 11. “if (i) retailer A discloses to supplier B its future pricing intentions in circumstances where A may be taken to intend that B will make use o f that information to influence market conditions by passing that information to other retailers (of whom C is or may be one), (ii) B does, in fact, pass that information to C in circumstances where C may be taken to know the circumstances in which the information was disclosed by A to B and (iii) C does, in fact, use the information in determining its own future pricing intentions, then A, B and C are all to be regarded as parties to a concerted practice having as its object the restriction or distortion of competition .” The Approach Developed in The United Kingdom
  12. 12. Court of Appeal ‘if (i) retailer A discloses to supplier B its future pricing intentions in circumstances where A may be taken to intend that B will make use of that information to influence market conditions by passing that information to other retailers (of whom C is or may be one), (ii) B does, in fact, pass that information to C in circumstances where C may be taken to know the circumstances in which the information was disclosed by A to B and (iii) C does, in fact, use the information in determining its own future pricing intentions.’
  13. 13. intend Phase I Phase II A C B use the information know
  14. 14. intend Information is not necessary A C B know Satisfying the standard
  15. 15. intend Information is necessary A C B know Satisfying the standard
  16. 16. Case Closed? dairy tobacco branded goods
  17. 17. Leniency incentive • An important question is whether there is an incentive to seek leniency in a pure hub and spoke. • Since A and C are “blind”, the whole story is not clear to each participant in the conduct
  18. 18. RPM with horizontal elements A C B Vertical agreement + policing/monitoring Experience is that it is possible to infer the former from the latter
  19. 19. A C B Horizontal agreement + policing/monitoring Experience is that it is not possible to infer the former from the latter

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