Author: Prof. Dr. H. Ercüment Erdem
Introduction
The hub and spoke cartel, which is a relatively new type of violation in terms of Turkish competition law, is defined as the indirect exchange of information between two independent undertakings which are horizontal competitors on the supplier or retailer level, through another undertaking operating at a different level of the production or distribution chain. Despite the lack of a direct exchange of information among the horizontal competitors, this indirect exchange of information can be considered to have the same negative impacts on the market as a normal cartel. However, it is not possible to conclude that each indirect exchange of information constitutes a hub and spoke cartel. Therefore, the existence of the elements for a hub and spoke cartel should be examined in each individual case.
The elements of a hub and spoke cartel are not defined in the legislation and are determined in light of the jurisprudence of the competition authorities. In this article, the main decisions where hub and spoke cartels have been evaluated in the UK, USA and Portugal are discussed.
Decisions in the UK
The Argos Decision
In the Argos decision regarding the UK toy market, the Office of Fair Trading (“OFT”) determined that there was a hub and spoke application between the toy supplier Hasbro operating in the upstream market and the retailers Argos and Littlewoods operating in the downstream market.
Hasbro learnt that the retailers were unhappy about their profit margins. Hasbro also predicted that if it agreed on prices with Argos and Littlewoods, which were considered as the largest toy retailers, other players in the market would also follow the prices applied by these two retailers. To achieve this result, Hasbro’s sales team negotiated separately with Argos and Littlewoods and informed them that the resale price determined by Hasbro would be applied by their competitors as well.
Argos and Littlewoods began to apply the resale price determined by Hasbro in accordance with the information flow they had obtained from Hasbro. In this process, where Argos and Littlewoods set a common price, it was determined that they never actually came together and exchanged information directly.
