A tale of a tough negotiator and two disgruntled suppliers
By the decision taken in the Costa Container Lines / Sintermar-Terminal darsena Toscana (AGCM, decision n. 19462, 29 January 2009, case I685, Boll. 4/09) the Italian Competition Authority (ICA) found that two companies providing container handling services in the port of Livorno (Leghorn), Terminal Darsena Toscana (TDT) and Servizi Integrati Terrestri Marittimi (Sintermar) engaged in price-fixing arrangements.
The relevant product market comprehends container handling services as a whole for the ICA did deem it necessary to further divide that into the segment for transfer of containers to/from ship to/from land carriers and into the transhipment segment. The geographical relevant market is constituted only by the port of Livorno where the parties are the leading operators totaling an about 80% combined market shares. The ICA found a low degree of substitutability of the port of Livorno with other ports, the only exception being that with the neighbor port of La Spezia. The inclusion of the latter into the geographical relevant market, however, would have not changed the level of market shares attributed to the parties.
The pricing arrangements took place at the end of 2006 in relation to a beauty contest staged by a shipping company Costa Container Lines (CCL) in order to land an as much advantageous supply contract as possible. To this end, CCL fuelled a price competition between TDT and Sintermar to make them propose lower and lower prices for the container handling services it wished to purchase. TDT and Sintermar, however, reacted to that by coordinating their participation in the contest and agreeing on which prices to propose to CCL.
Evidence furnished by the ICA to prove the anticompetitive practice are of two types. First, the ICA noted since November 2006 that TDT and Sintermar had taken a parallel behaviour with relation to the ongoing negotiations. Almost at the same time, they withdrew their preceding offers and tabled new proposals with prices at a level higher than what has been achieved at the previous stages of negotiation and also higher than those agreed in a previous contract signed by CCL and Sintermar. The AGCM held that the only possible rational explanation of that was the fact that the parties had been coordinating the pricing policies to apply to CCL. Second, the AGCM indicated that a number of contacts had taken place between representatives from TDT and Sintermar through which they coordinated their pricing policies. Eventually in January 2007 CCL signed a contract with Sintermar, but at prices higher than those previously offered by the latter and those agreed in a previous contract entered into by the same parties in 2006. The above conducts have been found by the ICA to have object and anticompetitive effects, and then TDT and Sintermar were condemned to pay a pecuniary sanction of € 960,000 and € 360,000, respectively.
Interestingly, in this case the competition infringers are two firms competing to win a contract from an important client with whom, at a point in time when the negotiations are still open, they grew annoyed because of his tough negotiation tactics. As a result, the parties left aside their rivalry to coordinate their conducts in the bidding with the aim of upping prices. Such coordination is however banned by competition law. They should have complained about the behavior of CCL upon the basis of unfair competition rules if they believed that CCL infringed them. Besides, TDT maintained that it talked with Sintermare lest the latter might have brought a suit against it for under cost pricing. To that the ICA replied that a firm may be sanctioned for under cost pricing only if it has a dominant position, which was not the case with TDT. Lastly, the AGCM did not content itself with proving that the investigated practices had an anticompetitive objective, which suffices to find an agreement in breach of competition. It also held that the TDT and Sintermar conducts had already caused an anticompetitive effect. This effect was identified in the difference between the prices Sintermar managed to impose on CCL in the contract of January 2007 and the prices CCL would have otherwise paid for should the collusion has not taken place. That should pave the way for follow on suits anyone lamenting a loss because of the collusion may be willing to bring against the colluding parties in order to obtain compensation.
The relevant product market comprehends container handling services as a whole for the ICA did deem it necessary to further divide that into the segment for transfer of containers to/from ship to/from land carriers and into the transhipment segment. The geographical relevant market is constituted only by the port of Livorno where the parties are the leading operators totaling an about 80% combined market shares. The ICA found a low degree of substitutability of the port of Livorno with other ports, the only exception being that with the neighbor port of La Spezia. The inclusion of the latter into the geographical relevant market, however, would have not changed the level of market shares attributed to the parties.
The pricing arrangements took place at the end of 2006 in relation to a beauty contest staged by a shipping company Costa Container Lines (CCL) in order to land an as much advantageous supply contract as possible. To this end, CCL fuelled a price competition between TDT and Sintermar to make them propose lower and lower prices for the container handling services it wished to purchase. TDT and Sintermar, however, reacted to that by coordinating their participation in the contest and agreeing on which prices to propose to CCL.
Evidence furnished by the ICA to prove the anticompetitive practice are of two types. First, the ICA noted since November 2006 that TDT and Sintermar had taken a parallel behaviour with relation to the ongoing negotiations. Almost at the same time, they withdrew their preceding offers and tabled new proposals with prices at a level higher than what has been achieved at the previous stages of negotiation and also higher than those agreed in a previous contract signed by CCL and Sintermar. The AGCM held that the only possible rational explanation of that was the fact that the parties had been coordinating the pricing policies to apply to CCL. Second, the AGCM indicated that a number of contacts had taken place between representatives from TDT and Sintermar through which they coordinated their pricing policies. Eventually in January 2007 CCL signed a contract with Sintermar, but at prices higher than those previously offered by the latter and those agreed in a previous contract entered into by the same parties in 2006. The above conducts have been found by the ICA to have object and anticompetitive effects, and then TDT and Sintermar were condemned to pay a pecuniary sanction of € 960,000 and € 360,000, respectively.
Interestingly, in this case the competition infringers are two firms competing to win a contract from an important client with whom, at a point in time when the negotiations are still open, they grew annoyed because of his tough negotiation tactics. As a result, the parties left aside their rivalry to coordinate their conducts in the bidding with the aim of upping prices. Such coordination is however banned by competition law. They should have complained about the behavior of CCL upon the basis of unfair competition rules if they believed that CCL infringed them. Besides, TDT maintained that it talked with Sintermare lest the latter might have brought a suit against it for under cost pricing. To that the ICA replied that a firm may be sanctioned for under cost pricing only if it has a dominant position, which was not the case with TDT. Lastly, the AGCM did not content itself with proving that the investigated practices had an anticompetitive objective, which suffices to find an agreement in breach of competition. It also held that the TDT and Sintermar conducts had already caused an anticompetitive effect. This effect was identified in the difference between the prices Sintermar managed to impose on CCL in the contract of January 2007 and the prices CCL would have otherwise paid for should the collusion has not taken place. That should pave the way for follow on suits anyone lamenting a loss because of the collusion may be willing to bring against the colluding parties in order to obtain compensation.
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