Illegal Collusive Activity, Assessment Example

The Article 101 was set in place in order to prevent collusive activity from occurring, more importantly prevent agreements made between cartels, and other corporations that would hinder free competition in the European internal market. In answering the question of “Is this evidence of illegal collusive activity as specified in Article 101 of the Treaty on the Functioning of the European Union?” In order to answer the question there are several arguments that can be made in order to see the problem in two sides. The first argument that can be made is that A-Level gas stations are not aware of the B-Level gas stations changing their prices to match theirs, as their prices are set by larger corporations that they own. Another argument that can be made is that A-Level gas stations are engaging in illegal collusive activities that are setting prices in order to get more money out of the customers. One of the last arguments that can be made is that the B-Level gas stations are trying to compete with the bigger gas stations by offering cheaper gas to customers than their larger counterparts.

The Bundeskartellamt (German Competition Authority) has the right in investigating the gas stations potential illegal collusive activities. As this type of practice that is been done is typically known as price gauging, it is major concern that disrupts the free competition of big and small businesses. This illegal practice could typically harm most B-Level gas stations, and more importantly the customers, as they are being made to pay for gas at higher price due to the activities of A-Level gas stations. In the first argument that can be made is that A-Level gas stations are not fully aware of the activities surrounding the pricing of B-Level gas stations. According to Article 101 of the Treaty on the Functioning of the European Union, “directly or indirectly fix purchase or selling prices or any other trading conditions.” (Article 101, 2013) What the case provides are that the A-Level gas stations that are mostly owned by larger corporation fix prices (raise or decrease) at all of their locations. They have the ability to set prices and can no way change the prices of B-Level gas stations, however, practices that have been discovered is that B-Level mirrors the pricing of A-Levels as they continually change prices. Corporations will not be aware of pricing but, can set prices by catering to the customer demand, the prices of gas in other busy areas, and the type of gas that is provides. Large corporations are mainly concern with making a profit and staying ahead of the competition.

The second argument that can be made however is that, A-Levels gas stations are in agreement with other A-Level gas stations or B-Level gas stations in order to routinely set prices during high peaks in demand in order for both levels to receive a sizable profit. With both levels of gas stations being in cohorts, this practice signals illegal activity that can be prosecuted under the Article 101. From the case, Bundeskartellamt found when one of the A-level gas stations raised its price, neighboring gas stations typically would follow within a matter of hours. These actions reflect a scheme that could be used in order to control the gas supply, and share in the market. Under these provisions, they are committing criminal acts. In the last argument, the B-Level or A-Level gas stations that didn’t follow suit, then the A-Level gas station would quickly reverse the increase. From these activities, they could be in violation of another provision that prohibit businesses, “apply dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage.”(Article 101, 2013) This harms B-Level gas stations that change their prices in order to keep up with the competition of A-Level gas stations. B-level gas stations will simply be responding to the actions of the bigger ones in order keep up with the market and acquire customers with lower prices. In the first argument presented, the A-Level gas stations were not at fault and simply following the directions of the larger corporations that own them. In the last two arguments, they were in violation of the provisions in the Article 101, in which the Bundeskartellamt has just cause to investigate the gas stations.

References

“Article 101”. (2013). Eur-Lex. Retrieved from http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:12008E101:EN:NOT