NEWSLETTER-2017

79 COMPETITION LAW Concept The damages resulting from a competition law infringement are often, and more traditionally, incurred by competitors, suppliers, and purchasers of the infringing undertakings. The widespread harm caused by the anti-competitive conduct also affects another category: the purchasers of the competitors of the infringers. This last group of purchasers is called “umbrella purchasers.” In other words, when its competitors form a cartel to illegally set higher prices, the undertakings that originally do not participate in such cartel tend to maximize their profits by responding with increased prices (also known as “umbrella pricing”), which eventually cause harm to their purchasers. It has been pointed out that when an undertaking is faced with increased prices 2 as a result of anti-competitive conduct in the market, it is expected to employ one of two strategies. Such undertaking may either leave its price below the cartel price, or it may adapt to such price by increasing its own price. The second and more preferred strategy is more frequently observed when the cartel’s market share is larger, the product homogeneity is higher, and the supply elasticity of the non- infringing undertaking is lower 3 . However, even though it conforms to the higher “umbrella” price, such undertaking may or may not be aware of a cartel that is present in the relevant market 4 . In this instance, the non-infringing undertaking simply benefits from the umbrella that has been opened by the cartelists; however, it does not participate in the anti-competitive conduct, itself. It needs to be emphasized that the competitors of the cartel members do not violate competition laws by adapting their prices unless their conduct amounts to tacit collusion. In order for the adaptation to market conditions to be considered a tacit collusion, an exchange of price information must exist that will enable 2 It must be added that the umbrella effect would similarly be the case of instances of decreased output, instead of increased prices. 3 Franck, Jens-Uve. Umbrella Pricing and Cartel Damages under EU Competition Law, European Competition Journal, Vol. 11, No 1, p. 136. 4 Maier-Rigaud, Frank. Umbrella Effects and the Ubiquity of Damage Result- ing From Competition Law Violations, Journal of Competition Law & Practice, 2014, Vol. 5, No. 4, p. 249.