Competition Law Imperial Chemical Industries Ltd v Commission of the European Communities

III. Anti-competitive Agreements (RA 10667, SEC. 14)
d. Concerted Practice
i. Case 48/69 - Imperial Chemical Industries Ltd v
Commission [1972]
SUMMARY
The market of dyestuffs within the EU is fragmented with high
barriers to inter-country entry of players. It is not an oligopoly but
10 major players hold 80% market share.
In 1964, some companies in different EU countries increased the
price by the same percent across the same categories.
In 1965, companies in Germany matched the price.
In 1967, all companies matched again at the same time.
This is concerted behavior. A synchronized increase is
conceivable but not of the same percent.
Year Judge Name
1972
DOCTRINE
Although parallel behaviour may not by itself be identified with a
concerted practice, it may however amount to strong evidence of
such a practice if it leads to conditions of competition which do
not correspond to the normal conditions of the market, having
regard to the nature of the products, the size and number of the
undertakings, and the volume of the said market.’ (para. 66)

FACTS

● From January 1964 to October 1967, 3 general and uniform increases in the prices of dyestuffs took place in the Community,
by 17 producers of dyestuffs
Date Price Increase Product Increased Where

FIRST INCREASE 15% most dyes based on aniline, Italy, the Netherlands, Belgium,
7 and 20 January 1964 with some category Luxembourg, certain third countries.
exceptions
SECOND INCREASE Germany
1 January 1965

THIRD INCREASE 8%–12% an increase for all dyes was 8% in Germany, the Netherlands,
mid-October 1967 Belgium, and Luxembourg
12% in France

● The Commission commenced motu proprio proceedings concerning these increases for presumed infringement of Article 85(1) of
the EEC Treaty against seventeen producers of dyestuffs established within and outside the Common Market, and against
numerous subsidiaries and representatives of those undertakings.
● The Commission found that the increases were the result of concerted practices, which infringed Article 85(1) of the Treaty,
between the undertakings: aka The ff market players made “undertakings” to uniformly increase prices:
○ Company A, Company B, Company C etc., and Imperial Chemical Industries Ltd. (ICI), Manchester.
● The Commission imposed a fine of 50,000 u.a. on each of these undertakings
● Hence the instant petition filed by one of the market players. Imperial Chemical Industries Ltd. has brought an application against
that decision.

Petition Imperial Chemicals Arguments

● It is contended that these increases cannot be explained simply by the oligopolistic character of the structure of the market.
● It is said to be unrealistic to suppose that without previous concertation the principal producers supplying the Common Market
could have increased their prices on several occasions by identical percentages at practically the same moment for one and
the same important range of products including speciality products for which there are few, if any, substitutes, and that they
should have done so in a number of countries where conditions on the dyestuffs market are different.
○ Respondent Commission argues that the interested parties need not necessarily have drawn up a common plan
with a view to adopting a certain course of behaviour for it to be said that there has been concertation.
○ Respondent Commission argues that it is enough that they should previously have informed each other of the
attitude which they intended to adopt so that each could regulate his conduct safe in the knowledge that his
competitors would act in the same way.
● The applicant argues that the contested decision is based on an inadequate analysis of the market in the products in question
and on an erroneous understanding of the concept of a concerted practice, which is wrongly identified by the decision with the
conscious parallelism of members of an oligopoly, whereas such conduct is due to independent decisions adopted by each
undertaking, determined by objective business needs, and in particular by the need to increase the unsatisfactorily low rate of
profit on the production of dyestuffs.
● It is argued that in fact the prices of the products in question displayed a constant tendency to fall because of lively competition
between producers which is typical of the market in those products, not only as regards the quality of the products and
technical assistance to customers, but also as regards prices, particularly the large reductions granted individually to the
principal purchasers.
● The fact that the rates of increase were identical was the result, it is said, of the existence of the 'price-leadership. of one
undertaking.
● It is also argued that the large number of dyestuffs produced by each undertaking makes it impossible in practice to raise prices
product by product.
● A further argument is that different price increases for interchangeable products either could not produce economically
significant results because of the limited level of stocks and ofthe time necessary for adapting plant to appreciably increased
demand, or would lead to a ruinous price war.
● Finally, it is said that dyestuffs for which there are no substitutes form only a small part of the producers' turnover.
● Taking these market characteristics into account and in view of the widespread and continuous erosion of prices, each member
of the oligopoly who decided to increase his prices could, it is argued, reasonably expect to be followed by his competitors, who
 had the same problems regarding profits.

RATIO

WON there was concerted practice?

Yes. 83. The increases are interrelated

[RULE] The Concept of a Concerted Practice

● 64. Article 85 distinguishes between the concept of 'concerted practices' and that of 'agreements between undertakings' or
'decisions by associations of undertakings'. The objective is to bring within the prohibition of this article a form of coordination
between undertakings that knowingly substitutes practical cooperation for the risks of competition, without reaching the stage of a
formal agreement.
● 65. A concerted practice, by its nature, lacks all the elements of a contract but may arise from coordination evident in the behavior
of participants.
● 66. Although parallel behavior alone cannot be equated with a concerted practice, it may be strong evidence of such a
practice if it results in conditions of competition different from normal market conditions, considering product nature,
company size, market volume, and other factors.
● 67. This is especially true if the parallel conduct enables parties to stabilize prices differently from what competition would dictate,
potentially harming the free movement of products in the Common Market and consumers' freedom to choose suppliers.
● 68. Therefore, determining whether there was a concerted action in this case requires evaluating the evidence supporting the
contested decision in its entirety, considering the specific market features of the products in question.

[RULE] Characteristic Features of the Dyestuffs Market

Market of the EU Community

#Producers 69. 10 large producers controlling 80% of market supply, often also manufacturing other chemical or
pharmaceutical specialties.

Cost of Production 70. Producers have diverse production patterns and cost structures, making it challenging to ascertain
cost of manufacturing.

Number of Products 71. Market has a high number of dyestuffs – each producer offering more than a thousand.

Substitutability 72. While standard dyes can often be replaced with alternatives, specialty dyes may have limited or
non-existent substitutes.

73. In some cases, especially for specialty products, the market tends toward oligopoly conditions.

Elasticity 74. Dyestuff prices constitute a relatively small portion of the user's final product price, leading to low
demand elasticity and potential short-term price increases.

Barriers to Growth 75. The growing overall demand for dyestuffs encourages producers to adapt policies to benefit from
(low) this increase.

Barriers to Entry (high) 79. The division of the market is attributed to the need for local technical support and quick deliveries,
with producers supplying their subsidiaries in various Member States and maintaining agents and
depots to ensure user undertakings receive timely assistance and supplies.

80. Even when a producer establishes direct contact with a significant user in another Member State,
prices usually align with the user's location and the national market's price level.

81. While this approach serves to meet the market's unique requirements, it also fragments
competition and impedes interpenetration of national markets at the consumer level, thus restricting
consumer access to various sources of production within the Community.

Each National Market 76. The Community's dyestuffs market consists of five distinct national markets with differing price
levels, not solely influenced by cost and charge differences among producers.

77. Each national market exhibits characteristics of an oligopoly, often with a price leader, which may
vary from the largest domestic producer to a foreign producer through a subsidiary.

Effect of Establsihment 78. The Common Market's establishment did not significantly impact these price differences among
of the EU Common national markets.
Market on the market

82. The peculiar characteristics of the dyestuffs market shape the context in which the facts of this case should be examined.

[APPLY] 83. The increases are interrelated

The Increases of 1964, 1965, and 1967

 ● Interpretation of events
○ 88. In the 1964 FIRST increase, all the involved undertakings announced and implemented their increases
simultaneously, following Company A’s lead (in Italy) following instructions from Company A’s main office
(Switzerland).
■ 89. Subsequently, Company B introduced the same increase in the Netherlands, and Company C did the same
in Belgo-Luxembourg on the same day.
○ 84. The 1965 SECOND increase in Germany on aniline dyes effectively extended the FIRST increase applied in Italy,
the Netherlands, Belgium, and Luxembourg.
■ 95. The price increase was uniform and simultaneously applied by all the producers without variation in
the range of affected products.
○ 86. The 1967 THIRD in France (12%, higher than 8%) increase aimed to compensate for the FIRST and SECOND
increases that France had not participated in due to price controls.
○ 87. Consequently, these three increases are interconnected, even though they occurred under varying conditions.
○ 90. These increases affected the same range of products for various producers and markets, primarily including most
aniline dyes, except pigments, food colorings, and cosmetics.
○ 99. Taken together, these three consecutive increases reveal progressive cooperation among the involved
undertakings.
● How did they do it?
○ 100. In the FIRST increase, announcements and implementation of price increases coincided (albeit with slight
variations in affected products)
■ But the SECOND and THIRD increases were different.
■ Company D and Company E announced, allowing the undertakings to observe each other's reactions in
different markets and adapt accordingly. the legal “undertaking” is evidenced by announcement
○ 101. Through these advanced announcements, the undertakings preemptively eliminated uncertainty about each other's
future conduct and mitigated a significant part of the risk associated with independent changes in conduct on various
markets.
○ 102. This was particularly relevant because these announcements rendered the market transparent concerning
percentage rate increases.
● What was the effect?
○ 103. The undertakings temporarily eliminated some of the prerequisites for price competition, facilitating parallel uniform
conduct.
○ 104. The fact that this conduct was not spontaneous is corroborated by an examination of other aspects of the market.
○ Not an Oligipoly. 105. With numerous producers, it cannot be said that the European dyestuffs market is strictly an
oligopoly, where price competition plays a minimal role.
○ But not weak players. 106. These producers are powerful enough to create a substantial risk that some might not follow
the general price increase in times of rising prices, opting for individual approaches.
○ Spontaneous and Equal change = unlikely. 107. Moreover, the division of the Common Market into five national markets
with different price levels and structures makes it unlikely that a spontaneous and equal price increase would occur on
all national markets.
○ 108. Spontaneous is conceivable, BUT the AMOUNT of increase would likely differ based on specific national
market characteristics.

[RULE]
● 115. The role of price competition is to maintain prices at the lowest possible level and facilitate the movement of goods between
Member States. This promotes efficient distribution of activities, productivity, and adaptability of undertakings to change.
● 116. Differences in price levels encourage the Treaty's fundamental goal of interpenetrating national markets, granting consumers
direct access to production sources within the Community.

[APPLY]
● 117. Due to the limited elasticity of the dyestuffs market, resulting from factors like price transparency, interdependence among
different dyestuffs for each producer, the relatively low proportion of dyestuff prices in the user's final product cost, the
advantages of local suppliers for users, and transport costs, preventing actions that artificially diminish opportunities for
interpenetration at the consumer level becomes crucial.
● 118. While producers are free to change prices considering competitors' conduct, it is contrary to the Treaty's competition rules
for producers to cooperate in any way to determine a coordinated approach to a price increase, ensuring its success by
eliminating uncertainty regarding essential elements like the amount, subject matter, date, and location of increases.
● 119. Given these circumstances and considering the dyestuffs market's nature, the applicant's conduct, in conjunction with other
undertakings facing proceedings, aimed to replace competition risks and the uncertainties of competitors' spontaneous reactions
with cooperation, constituting a concerted practice prohibited by Article 85(1) of the Treaty.

The Effect of the Concerted Practice on Trade Between Member States

● 121. The concerted practices sought to maintain the market in a fragmented state, potentially affecting how trade in these
products occurred between Member States.
● 122. The parties implementing these practices aimed to minimize risks associated with changing competition conditions during
each price increase.
● 123. Uniform and simultaneous increases helped maintain the status quo, ensuring that undertakings did not lose customers and,
consequently, keeping traditional national markets 'cemented.' This hindered the free movement of these products within the
Common Market.

FALLO
149 The applicant has failed in its submissions.
150 Therefore it must be ordered to bear the costs
● In view of the frequency and extent of the applicant's participation in the prohibited practices, and taking into account the
consequences thereof in relation to the creation of a common market in the products in question, the amount of the fine is
appropriate to the gravity ofthe infringement of the Community rules on competition.
● Under Article 69(2) of the Rules of Procedure the unsuccessful party shall be ordered to pay the costs.