Collusion in oligopolies: The Italian Council of State says that ferry companies did not agree to increase fares for the Sardinia-Continental Italy maritime links (Sardinia Ferries Fares)

By a recent judgment (Case 4123/2015,Autorità Garante della Concorrenza e del Mercato v GNV and others(Sardinia Ferries Fares), the Italian Council of State (CS) has reversed the decision made by the Italian Competition Authority (ICA) in the Sardinia Ferries Fares. The ICA had penalized four ferry companies - Moby, SNAV, Grandi Navi Veloci and Marinvest- for agreeing with a concerted practice to increase the fares for the 2011 Summer season for a number of maritime links between Sardinia and Continental Italy.

The ICA based its infringement finding on the parallel pricing policies applied by the parties as well as on the absence of alternative rational explanation of such behaviour and some contacts occurred among the ferry companies ( the CIN joint-venture set up by Moby, GNV and SNAV to bid for the purchase of Tirrenia, an ailing competitors then owned by the State, and two commercial agreements concluded between GNV and Moby).

The CS hold that the ICA did not prove the concerted practice to the requisite evidentiary standard. It noted that the ICA competition concerns were mainly grounded on the parallel conducts of the parties and that the GNV-Moby commercial agreements and the CIN joint-venture were lawful transactions, which could not be regarded as evidence of a collusion. The CS also viewed the facts submitted by the parties, increasing fuel costs and serious financial problems, as convincing explanation for their conducts. Crucially, the CS pointed to the the oligopolistic tendencies and the high degree of transparency of the relevant markets. Bearing in mind such competition conditions, the CS ruled that no concerted practices could be found in a situation where the price equilibrium formed in an oligopoly was the result of different decisions made by the market operators on the basis of factors related to imperative needs of economic nature. Thus, the CS concluded that the ICA had mistakenly found a collusion in the parallel pricing policies of the parties.

All in all, Sardinia Ferries Fares well illustrates the difficulties for competition authorities to establish collusion in oligopolies, especially when the observed anomalies in the market appear to be the response of businesses to external shocks.