Chillin'Competition

Relaxing whilst doing Competition Law is not an Oxymoron

A strong candidate

with 4 comments

In the past few days we’ve learnt that President Obama will run for re-election in 2012 and that Zapatero won’t. But unfortunately not all candidate-related news could be so positive: we have a strong candidate for the 2011 worst antitrust development prize.

The Spanish CNC announced on Tuesday its decision to initiate a formal investigation concerning the Tourism Committee of the Confederation of Spanish Industries (CEOE) as well as one of its executives (well known in Spain as a former president of FC Barcelona) on the basis of allegations that the latter had stated at a tourism fair held in Madrid last January that it would be necessary to increase hotel rates for 2011.

I was completely puzzled when I read the CNC’s press release (and many of you will recall that this is the second time that this has happened lately with a press release from the CNC).

I don’t see how such a general non-developed statement could potentially have the effect of giving rise to a raise of prices (although in view of the prevailing trends, it’s likely that the CNC won’t discuss this and will rather consider that in addition to info exchanges or collective bargaining agreements, public speeches such as this one constitute a restriction by their object..) in view of the number of hotels operating in Spain, of the hundreds of relevant markets with different competitive conditions on which they operate, and given the absence of any reference to what the recommended raise was or of any other alternative focal point. According to economic theory it’s simply absurd to pretend that an statement such as the controverted one can, without more,  generate any collusion at all.

What’s more shocking here is that almost no one within the sector was until now aware of the existence of such statement on the need of raising prices, and so the main effect of the CNC’s intervention has been to expand the reach of what it sees as an invitation to collude. A cynic could even argue that the CNC is mediating in an info exchange amongst competitors…

Looking at the positive side of it, the “good” news is that for as long as some competition authorities continue to measure theis success in terms of volume/number of cases dealt with, there’ll be plenty of competition..for the worst antitrust development prize.

Written by Alfonso Lamadrid

8 April 2011 at 3:27 pm

Posted in Uncategorized

4 Responses

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  1. Price signaling is a serious offense… if true. As with any conduct that falls short of price fixing (e.g. exchange of information) the devil is on the details. The CNC should not rush into a decision and strive to produce evidence of effects and/or intent.

    Alvaro

    10 April 2011 at 1:22 pm

    • I fully agree, Alvaro. The problem here lies on the fact that (as far as I know, and I´m not involved in the case) there is no price signaling, but merely an opinion which, in my view, and for the reasons outlined in the post, is completely incapable of producing any anticompetitive effect.

      Alfonso Lamadrid

      10 April 2011 at 4:45 pm

  2. No doubt the CNC will classify this as a collective price recomendation and as an “object” offence. The authority could even try to sell it as the Spanish equivalent of the Paris luxury hotel cartel. The facts are likely to be undisputed and the Council might have given a ‘behind the doors’ nod of support to the Direcorate of Investigation to open the investigation…

    Madrid lawyer

    11 April 2011 at 2:48 pm

  3. Between Joan Gaspart saying that Hotels are too cheap in Spain and should apply higher prices and an infringement of Article 101 TFEU the abyss seems to be too deep. if the case goes ahead Gaspart lawyers will surely have fun!

    Miguel Troncoso Ferrer

    11 April 2011 at 7:14 pm


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