The Case of Inevitable Transparency - A Structural Analysis of Collusion in B2C and B2B E-Commerce Markets

Abstract: This thesis deals with collusion risks in e-commerce markets based on an analysis of economic theory on structural factors facilitating collusion and empirical findings from studies and case law. It further offers an analysis of the legal status of any such collusion and a discussion on competition policy in relation to it. Whereas the legal rules governing collusion in Article 81(1) of the EC Treaty call for explicit coordination to the minimum of a concerted practice between competitors, the economic analysis of the same focuses more on the anti-competitive effects on a market and the structures and mechanisms that might trigger collusive outcomes. Specific structural factors present in a market, such as high concentration, product homogeneity, barriers to entry, high transparency etc., will generally speaking tend to facilitate collusion and possibly lead to anti-competitive effects. When looking more specifically at both structural factors making collusion easier to sustain and structural factors making collusion harder to sustain, one finds that a number of these factors are also considered general characteristics of e-commerce markets, as far as it is possible to make such generalisations without looking at a specific industry or market. These characteristics can be identified as mainly the increased transparency and information exchange, the reduced menu costs, the lowered barriers to entry and the global access available through the Internet. After analysing each characteristic more specifically and assessing its level of general application to e-commerce markets, I find however that increased transparency, high levels of information exchange and reduced menu costs are clearly more dominant in comparison with the other characteristics, which carry greater industry-specific dependence. This results in the conclusion that under similar oligopolistic market structures as present in conventional commerce, the balanced effects of the general characteristics in e-commerce will result in higher collusion risks in these markets in comparison with their conventional counterparts. Whereas B2C e-commerce would be more prone to tacit collusion, B2B e-commerce offers enhanced possibilities also of more explicit forms through the possibilities of engaging in secret discussions in certain e-marketplaces. As the tacit collusion derived from increased transparency cannot be considered incompatible with Article 81(1) according to current case law, addressing the potential anti-competitive impacts of such behaviour through competition policy offers a number of seemingly unsolvable problems, related mainly to the difficult status of transparency as both an inevitable structural pillar of electronic commerce, and the major contributor to the facilitation of collusion.