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The economic literature explains that most markets tend towards oligopoly over the longer term. Markets may consolidate when winners rise to the top (thanks to efficiencies and innovation) and losers are forced to exit. Consolidation may also result from M&A activity which can be intensive, with sectors sometimes experiencing a boom of high profile acquisitions. This does not necessarily imply that competition is impaired. A concentrated ‘sector’ is not necessarily the same as a concentrated ‘market’.  Even in highly concentrated markets, there may be effective competition.  A low number of firms on the market might disguise the fact that intense competition is actually playing out between those firms.  This is sometimes the case in the pharma sector where the total number of firms active in a particular product market may be small and constant – but where the identity of those firms changes over time,  as one firm ‘wins’ the market, only to be supplanted in the future by a rival with a superior product. Highly concentrated markets can of course give rise to competition issues.   Consolidation could mean that a firm obtains market power – whether on its own or, in some jurisdictions, collectively.  Tight oligopolies can display characteristics which are more conducive to cartel conduct or at the least tacit coordination where firms are able to predict their rivals’ future behaviour and align to that expectation, without colluding.  Similarly, in a more concentrated market, practices which might have been borderline or even benign in competition terms may begin to attract the attention of competition authorities. The oligopoly issue is not new. Textbooks are replete with cases and observations on how competition agencies have tried to tackle it, often with a degree of creativity.  European reforms in 2004 sought to ensure jurisdiction over ‘non coordinated’ effects, including where a merger might impair competition without leading to the emergence of a firm with a paramount market position.  Many countries use legal presumptions to flip the burden of proof when companies adopt parallel behaviour (so that companies and not the agency have to show innocence).   The notion of ‘collective dominance’ is familiar to many jurisdictions (even if the notion of ‘abuse’ of collective dominance is less clear). An emerging concern is that the European Commission is becoming more aggressive when assessing mergers that result in high levels of concentration. In some sectors, the Commission has started to look at the impact of a merger on R&D efforts despite the fact they are at a very early ‘pipeline’ stage.[1]  The Commission has also expanded the category of ‘non coordinated effects’ to enable it to intervene in relation to  mergers of companies that are not each other’s closest competitors, but merely close competitors – and even to mergers between parties that are not close competitors, but where one of the parties is an “important competitive force”.[2] In some quarters, allegations have been made the traditional antitrust rules are not fit for purpose and that the agencies should do more, lest they let consumers down.[3]  These assertions are unlikely to have prompted agency action – though they have certainly been heard and relayed by high ranking competition officials. In any event, seemingly innocuous conduct in oligopolistic markets remains a focal point for competition agencies. The European Commission is currently investigating price signalling between competitors[4] and has treated information exchange between competitors as serious cartel conduct – even though the information may be about pricing factors (as opposed to price) and the people involved were not responsible for pricing within their companies.[5] The US Department of Justice’s Antitrust Division is currently looking into allegations of collusion between airlines. Although the allegations are undefined, they are thought to relate to public statements by airline executives. This probe comes on the heels of fast-paced consolidation in the sector. In fact, since 2008, four mergers have reduced eight big airlines to four. It is clear is that companies in concentrated markets remain in the spotlight – even if their merger has been cleared. Risk-assessments are a well-known and well-trusted tool in the sphere of competition law compliance.[6]  This article explores what sorts of compliance precautions a company can consider when it finds itself in a highly concentrated market and may therefore exposed to enhanced antitrust risk.

Higher concentration is more conducive to collusive conduct

Enhanced agency scrutiny of compliance with existing rules should be anticipated. An in-house lawyer may find themselves stuck in the middle if the oligopoly problem:  the inability of agencies to differentiate between unilateral conduct (independent actions/reactions) and coordinated behaviour which offends the rules.  Some regions, e.g. Eastern Europe seem more suspicious than others of parallel conduct.  In certain sectors that risk may be greater. Higher concentration means that contacts with competitors (e.g. information exchange) are more likely to have an impact on the market. Practices that were not thought to be risky or were borderline may now be prioritised by the agencies.  Companies in newly concentrated markets cannot avoid every risk.  There is no need to be overcautious – but they should pay additional, scrupulous attention to avoid creating risk. One area for extra vigilance and perhaps additional housekeeping rules is trade association activity – not least where an enlarged company may expect (and be expected) to play a bigger role. Legal could require notification before the company becomes a member of a new association.  Approvals could be required before individuals join or attend formal/informal subgroups where the case law suggests that people might sometimes become desensitised to the risks.   Social activities connected  with trade associations have also been shown to be fertile ground for collusion.  If this is a risk, an enhanced compliance programme could require a brief report on every social contact (with details of who was there; when; and why). Contacts with ex-colleagues are a common source of problems. If this is a risk, then the company could impose a short ‘quarantine period’  during which contact with any ex-colleague would requires pre-approval – and perhaps also special training, e.g. if they were spouses/golf partners etc. This may be a particular risk where a transaction has required divestments as a condition of merger control clearance,  In those circumstances, employees might find themselves in the same room with a former colleague who now works for an important competitor. Joint ventures with competitors are another area to consider. In highly concentrated markets, it makes sense to conduct a review of all joint ventures with competitors. That would consider where they are located; what they do; how they actually operate in practice.   If the event of a complaint, competition authorities will look closely at whether the parent companies have taken steps to manage the flow of any competitively sensitive information.  Rules/guidance on this topic should be in place for nominated directors and any secondees. In markets characterised by bids/tenders, it will be important to involve Legal in the discussion (and vetting) of possible sub-contracting arrangements and consortia bidding scenarios whenever competitors are involved. It may also make sense to think laterally about any other ‘joint’ industry activity.  Government lobbying for example may be common in an industry but treated differently according to applicable competition laws. Indirect contacts with competitors should also be considered. A number of competition authorities are looking at price signalling.  To head this off, companies may wish to enhance pre-approval processes for management speeches, analyst briefings and any other public presentation which could touch on commercial matters, especially pricing. Steps should be taken to avoid giving an incorrect impression to the market and authorities that collusion underpins business decisions which were in fact taken unilaterally, The not insurmountable challenge is to develop a process which enables Legal to trace how pricing decisions are made both generally and on specific bids so that the independence of the process can be demonstrated if challenged.  This could initially focus on the countries which tend to be most sceptical  about parallel conduct.

New concentration = new rules.

Additional competition rules may start to apply to a company (and its competitors) because of an altered market structure. For example, a number of countries have presumptions/deeming provisions relating to collective dominance (which might be met because of a merger between third parties).  In addition, some countries may have a low presumption for single-firm dominance.[7]   There is no international consensus on how a position of collective dominance can be abused (individually or collectively) but what is clear is that conduct which can be taken to target new entrants is very risky. Companies with material positions in countries with deeming-provisions should consider whether their sector is likely to be an enforcement priority, including because of a realistic prospect of customer complaints. Companies should consider the impact of these laws on their compliance programme: guidance on pricing, refusal to deal, exclusivity, discrimination etc. may need to be included. Companies also need to be alert to the bigger picture. Many countries around the world have ‘market study’ powers, allowing their competition authorities to investigate a sector thoroughly – despite there being no allegation of any individual wrongdoing.  These investigations always prove to be time consuming and expensive for companies.  They can also lead to outcomes (e.g. divestment) which may not even be possible under generally applying competition enforcement competition powers.  Companies need to be on guard for suggestions by the competition agency/government or by third parties (customers, suppliers) that the sector is displaying ‘market failure’ symptoms e.g. public restrictions of competition; customer inertia; information asymmetry between customers and suppliers etc.

Freedom from investigation

High(er) concentration gives rise to a greater vulnerability to complaints and investigation. This is not a reason to be over-cautious.  But additional legal checks and balances may preserve a company’s  commercial freedom and freedom from investigation. Arranging a brainstorm with the company’s antitrust team on where enhanced risks may lie and what mitigation steps can be put in place is a sensible move. Some of the outcomes may be simple and yet avoid unnecessary pain in the future.  For example, companies need to get the terminology straight: how should internal documentation (a major part of every investigation these days) describe the company’s market position in a way that is accurate but will not need justification explanation in another context? Deeper thinking will need to take place about how compliance efforts should change to address some of the areas outlined above. Internal procedures are also crucial. Companies in newly concentrated markets should enhance internal processes so that any escalated complaints  are reviewed by Legal early.  Complaints which should raise serious red flags are, for example, failures to bid and discrimination to prevent market entry. The Legal department may also want to consider whether to carry out a post-merger ‘health check’. It is notoriously difficult to spot the most serious antitrust violations as part of due diligence but an intensive audit after a deal has closed can help identify areas for follow up (whether with the seller or a competition authority). Looking ahead, another consideration for a company in a highly concentrated market is that there may be more consolidation to come. From a merger control perspective, there may be an advantage in being the first to move – before the agencies decide that enough concentration is enough.   This article was first published on Practical Law Competition 

[1] Case M.7559 Pfizer/Hospira 4 August 2015; Case M.7275 Novartis/GSK Oncology 28 January 2015 [2] Peristerakis, Prompers and García The Commission’s Merger Enforcement in Mobile Mergers: Brave New World for Non-coordinated Effects? CPI Antitrust Chronicle; November 2015(1). [3]  Khan The next president should break up some big companies (article published in The Washington Post on 28 October 2015) available here: [4] See Commission’s Press release IP/13/1144 of 22 November 2013, available here: [5] See Case C- 286/13 P Dole Food v Commission ECLI:EU:C:2015:184. [6] [7] Germany, China, Russia, Indonesia, Taiwan and Vietnam have deeming provisions for collective dominance. Brazil is an example of a major jurisdiction with a relatively low market share presumption of singe firm dominance (20 per cent).


Samantha Mobley is a partner in the EU, Competition & Trade Practice of Baker McKenzie's London office and she is a member of the London office Management Committee. She led the Firm's Global Antitrust & Competition Practice Group for six years. Samantha is recommended as a leading individual for competition law in the Chambers Guide to the UK Legal Profession and Who's Who Legal in 2018. She was featured in the Global Competition Review's 2016 Women in Antitrust Survey as one of the top 150 women in antitrust globally. She is also a Non-Governmental Advisor to the International Competition Network.


Grant Murray is the Senior Professional Support Lawyer for Baker & McKenzie’s Global Antitrust and Competition Group based in London. Grant has responsibility for the know-how and training needs of a practice group comprising over 300 competition lawyers spread across more than 40 countries. A central part of his role involves monitoring and updating the group on key developments and trends in EU and global competition law, focusing on the practical implications for clients and lawyers. Grant is a Non-Governmental Adviser to the ICN (appointed by the UK Competition and Markets Authority) and a regular contributor to the work of the OECD through the Competition Committee of the OECD’s Business and Industry Advisory Committee (BIAC).

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