Characterizing Hard Core Cartels Under Article 101 TFEU
DOI | 10.1177/0003603X20929121 |
Date | 01 September 2020 |
Published date | 01 September 2020 |
The Antitrust Bulletin
2020, Vol. 65(3) 376-400
Characterizing Hard Core
ª The Author(s) 2020
Cartels Under Article 101 TFEU
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DOI: 10.1177/0003603X20929121
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Niamh Dunne*
Abstract
The prohibition of cartels embodies arguably the sole universal norm of global competition law.
Yet a precise understanding of what constitutes a cartel remains elusive, a problem that is
exacerbated in the context of Article 101 Treaty on the Functioning of the European Union by
the Commission’s administrative enforcement procedures and the expansive approach to the “by
object” category of restraints. This article aims to provide a more precise characterization of the
hard core cartel concept as reflected in EU competition case law and practice and to explore why
such conduct continues to constitute the “supreme evil” of contemporary antitrust enforcement.
Keywords
cartels, Article 101 TFEU, EU law
I. Introduction
The prohibition of cartels has the dubious distinction of embodying perhaps the sole universal norm of
global competition law: “[t]he supreme evil of antitrust,”1 “the most egregious violations of compe-
tition law,”2 and “cancers on the open market economy.”3 For all the obvious tropes—smoke-filled
rooms in anonymous hotels, and so forth—a precise understanding of what constitutes a cartel for this
purpose remains elusive. This is particularly the case under Article 101 of the Treaty on the Function-
ing of the European Union (TFEU), where an absence of criminal sanctions and an expansive approach
to the notion of “by object” restrictions means that the legal assessment of cartel behavior often has
little to distinguish it from other forms of anticompetitive coordination. Nonetheless, within current
enforcement practice, cartels are recognized as a particular (and, it will be argued, particularly acute)
1. Verizon Communications v. Law Offices of Curtis V. Trinko, LLP, 540 U.S. 398 (2004).
2. OECD, RECOMMENDATION OF THE COUNCIL cONCERNING EFFECTIVE ACTION aGAINST HARD CORE CARTELS (1998), updated in 2019
but retaining the same description.
3. Competition Commissioner MARIO MONTI, FIGHTING CARTELS WHY and HOW? WHY SHOULD WE BE CONCERNED with CARTELS
and COLLUSIVE BEHAVIOUR? (Speech at the 3rd Nordic Competition Policy Conference, Stockholm, Sept. 11, 2000).
* Department of Law, London School of Economics, London, United Kingdom
Corresponding Author:
Niamh Dunne, Department of Law, London School of Economics, Houghton Street, London WC2A 2AE, United Kingdom.
Email: n.m.dunne@lse.ac.uk
Dunne
377
violation of Article 101,4 thus requiring distinctive enforcement processes and meriting special sub-
stantive treatment. This article seeks to bridge the gap between the theory and practice of anti-cartel
enforcement, through an exploration of the cartel as it is conceptualized within competition practice
and case law. Although a precise and exhaustive definition is arguably impossible in light of the wide
(and ever-evolving) range of behaviors that the cartel concept must cover, the object of the exercise,
ultimately, is to identify and better understand what is so inherently “unacceptable” about cartel
conduct, specifically, within contemporary competition law.
Most antitrust lawyers would no doubt claim to know a “hard core”5 or “plain vanilla”6 cartel when
they see it. Yet crafting an effective legal definition is a surprisingly complex business, and disagree-
ment exists about the outer parameters of the cartel concept.7 The archetypal hard core cartel involves
secret collusion between competing undertakings to restrict fundamental parameters of competition,
such as price-fixing or market-sharing. Yet such an approach risks both over- and underinclusiveness,
potentially catching welfare-enhancing forms of horizontal behavior, for instance, or neglecting cartels
effected through nonhorizontal channels.
Under Article 101, in particular, there is a fundamental mismatch between the formal legal approach
to identifying prohibited anticompetitive behavior, and the enforcement processes utilized at European
Union (EU) level to tackle cartel conduct. Article 101(1) prohibits forms of coordination between
individual undertakings that can be deemed restrictive of competition by virtue of their “object or effect.”
Yet while cartels are treated as unambiguous “by object” restraints, the parameters of the object category
extend beyond cartel conduct as such. It thus encompasses, inter alia, certain vertical restraints, alongside
less overtly anticompetitive horizontal coordination. Strictly speaking, therefore, whether an arrange-
ment is classified as a cartel or instead as some other form of anticompetitive coordination is irrelevant to
whether it is deemed restrictive of competition. Within enforcement practice at the EU level, however,
cartels are singled out for distinctive and exceptional treatment within the Commission’s enforcement
tool kit. Categorizing behavior as a cartel thus opens multiple procedural avenues for defendants—
including the Commission’s leniency program and cartel settlement procedure—but also closes off
others, in particular the Article 9 commitment procedure. Moreover, despite a nominal starting point
that all agreements must be assessed within their wider legal and economic context under Article 101(1),
recent case law suggests that putative cartel restraints may benefit from a truncated assessment which
places greater emphasis on the type of restraint and less on its broader context.
Given this significance, it is important, ex ante, to have a clearer understanding of what sorts of
behavior fall within the contours of the cartel concept, and perhaps more usefully, why such behavior
is approached in this manner. The starting point is thus that the notion of a cartel is not an agreed term
of art which is subject to any authoritative definition under Article 101. In light of the implications in
practice of designation as a cartel, however, the argument is that it should be amenable to more precise
demarcation or “characterization.”8 The purpose of this article is to do so.
4. Most basically, on its website (https://ec.europa.eu/competition/index_en.html), the EU’s Directorate-General for
Competition divides its enforcement activities between four broad categories of cases: cartels, antitrust (which
encompasses all violations of Articles 101 and 102 TFEU excluding cartels), mergers and State aid.
5. OECD, RECOMMENDATION OF THE COUNCIL cONCERNING EFFECTIVE ACTION AGAINST HARD CORE CARTELS (2019). The term is used
in this article to describe anticompetitive practices that may be considered to fit squarely within the cartel category and thus
merit distinctive legal treatment on this basis.
6. Frank H. Easterbook, Workable Antitrust Policy, 84 MICH. L.R. 1696, 1701 (1984).
7. An obvious open question is whether and when blatantly restrictive regulation that governs self-employed professionals
should be treated as cartel conduct: see, e.g., Aaron Edlin & Rebecca Haw, Cartels by Another Name: Should Licensed
Occupations Face Antitrust Scrutiny?, 162 U. PENN. L.R. 1093 (2014).
8. ALISON JONES et al., JONES & SUFRIN’S EU COMPETITION LAW, 7th ed. 679 (2019).
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The Antitrust Bulletin 65(3)
This article is structured as follows. Section II makes the case for this characterization exercise, by
reference to both the procedural and substantive implications of treating particular conduct as a cartel.
Section III introduces and explores four key elements of the hard core cartel concept under Article 101:
(i) cartels comprise forms of horizontal collusion, (ii) which restrict key parameters of competition,
(iii) involving purely private profit-maximizing behavior, and (iv) which almost invariably include
some form of deliberate secrecy and/or deception on the part of participants. Section IV concludes
briefly by considering further what this expanded definition tells us about the nature of hard core
cartels and the priorities of contemporary antitrust enforcement in the EU.
II. Understanding the Concept of a Cartel: The Importance of
Characterization
Pose the question “what is a cartel?” in the context of U.S. antitrust law, and two glib but broadly
accurate answers might present themselves: it is a per se breach of §1 of the Sherman Act,9 and it is an
antitrust infringement for which defendants may be sent to prison.10 Such treatment marks cartels as
qualitatively distinct—indeed, elevated—violations of the antitrust rules. Per se condemnation is
reserved for restrictions that “have manifestly anticompetitive effects and lack any redeeming
virtue,”11 a heightened standard that, today, is satisfied only in the context of cartel behavior. The
rationale is that such behavior constitutes an immediate and direct interference with “the free play of
market forces”12 and thus presents an almost existential challenge to the free market philosophy that
underpins the antitrust system. Criminalization goes hand in hand with the automatic and unqualified
condemnation of cartel behavior, moreover, marking such conduct for heightened moral censure over
and above the private and administrative law penalties that attach to other antitrust violations.
What is missing from either formulation is an explanation of what types of behavior, and why, may
be subject, ex post, to such distinctive treatment.13 This, as noted, is similarly the case under Article
101—and here, such absence is particularly notable, insofar as even the...
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