Term and Definition: Tacit Parallel Conduct
Tacit parallel conduct describes, in competition law, the identical behavior of several companies in a market, without any explicit or tacit agreement having been made. A typical example is the simultaneous increase or decrease of prices by several providers of the same goods or services. The phenomenon is particularly examined in antitrust law and abuse supervision, as at first glance it may appear to be anti-competitive conduct, but is generally not per se considered unlawful.
Distinction from Other Antitrust Terms
Anticompetitive Agreements and Concerted Practices
A clear distinction is required between tacit parallel conduct and agreed or concerted practices (§ 1 GWB; Art. 101 TFEU). While the latter presuppose a consensus—that is, conscious coordination—tacit parallel conduct is based solely on independent companies acting identically due to similar market conditions or economic constraints, without any exchange of information or coordination having taken place between the companies.
Coincidental Alignment and Oligopoly Structure
Tacit parallel conduct occurs particularly frequently in oligopolistic market structures, where only a few companies dominate the market (cf. oligopoly). Unlike anticompetitive agreements, in tacit parallel conduct the alignment of competition is attributable solely to external market factors, such as market transparency and symmetry.
Legal Foundations and Legal Assessment
Legal Bases in German and European Law
German antitrust law (§§ 1 ff. GWB – Act against Restraints of Competition) as well as European competition law (in particular Arts. 101 and 102 TFEU) place agreements, decisions, and concerted practices under a general suspicion of abuse. Tacit parallel conduct, however, generally remains outside these regulations, as the elements of coordination required as prerequisites are lacking.
Burden of Proof in Antitrust Proceedings
To prove anti-competitive behavior, evidence of at least an implicit coordination between companies is required. Mere parallel conduct—even if repeated and over an extended period—is not sufficient for sanctioning under current law. The antitrust authorities (such as the Federal Cartel Office or the European Commission) must provide indications of any kind of information exchange or conscious form of coordination.
Economic and Legal Causes of Tacit Parallel Conduct
Market Transparency and Reaction Mechanisms
Highly transparent markets make it more likely that companies will react similarly to market changes, such as raw material prices or cost increases. This occurs independently, as all market participants perceive the same signals and conditions.
Parallelism Resulting from Market Structure
Another factor in tacit parallel conduct is market structures with low competitive intensity, such as a supply oligopoly. At the same time, significant price leadership is an indicator, but not proof, of antitrust-relevant behavior.
Case Law and Practical Examples
Federal Court of Justice and Court of Justice of the European Union
The highest court judgments in Germany (such as BGH, Decision of 26.01.1988 – KVR 1/87) as well as at EU level (including the cases Suiker Unie, T-Mobile Netherlands BV) expressly emphasize that parallel conduct cannot readily be considered anti-competitive. Intervention by antitrust prohibitions is only possible if there are further indications of coordinated conduct.
Typical Practical Cases
Some of the most well-known industries exhibiting observable tacit parallel conduct are especially the oil sector, the cement industry, and retail. There has long been debate in these sectors over whether coordinated behavior or merely market factors explain the synchronized actions.
Consequences and Significance for Competition Oversight
Limits of Antitrust Intervention
Tacit parallel conduct illustrates the limits of antitrust oversight. Lawful, market-driven uniform conduct cannot be sanctioned without threatening the principle of free competition itself. Antitrust authorities are therefore required to exercise particular care in handling evidence.
Requirement for Further Evidence
The prerequisite for antitrust intervention always remains proof of additional coordination or exchange of information. Pure parallel price formation does not constitute evidence of a violation of competition law.
Conclusion
Tacit parallel conduct represents an essential criterion for distinction in competition law and occurs primarily in oligopoly markets. Mere parallel behavior by several companies is legally permissible as long as no further conspiratorial elements are present. Thus, tacit parallel conduct is a central area of review for German and European antitrust oversight, without being per se classified as anti-competitive. The aim remains the protection of free competition while simultaneously recognizing economic realities.
Frequently Asked Questions
What legal consequences can tacit parallel conduct have for the companies involved?
Tacit parallel conduct is, from an antitrust perspective, generally not prohibited, since it does not necessarily presume any unlawful agreement between companies. Under certain circumstances, companies are allowed to adapt their market behavior to that of their competitors, provided there is no coordination or agreement. Nevertheless, legal consequences can be significant if authorities such as the Federal Cartel Office or the European Commission suspect that the parallel conduct points to a concerted practice or coordinated behavior. In such a case, an investigation can be initiated to determine whether there is a cartel violation under § 1 GWB (Act against Restraints of Competition) or Art. 101 TFEU (Treaty on the Functioning of the European Union). Should the parallel conduct result from a secret arrangement or other cooperative practices, companies may face substantial fines, claims for damages, and even criminal consequences. In addition, the affected company may be required to cease antitrust-infringing behavior and implement preventive measures.
How do authorities distinguish between legitimate market reactions and illegal cartel formation in the case of tacit parallel conduct?
Authorities analyze tacit parallel conduct using various indicators and pieces of evidence to differentiate between permitted uniform market reactions and prohibited cartel agreements. Key criteria include, in particular, the absence of any communication or coordination between companies, the transparency of market conditions, the structure of the relevant market (oligopolistic structures, for example, promote parallel behavior), and the economic rationality of the conduct. Legitimate reactions are regularly based on publicly available information and made in the interest of one’s own business, such as following price signals or cost developments. As soon as there are indications of conscious coordination—such as through internal documents, emails, or meeting minutes—this may lead to a re-qualification as coordinated conduct. The burden of proof for the existence of an anti-competitive agreement lies with the antitrust authority. In doubt, companies may not be punished if the parallel conduct is equally explainable by market-rational decisions.
What conditions must be met for tacit parallel conduct to be considered unproblematic?
Tacit parallel conduct is legally unproblematic as long as there has been no communication, coordination, or other collusion between competing companies and the conduct has occurred independently. The prerequisite is that every business decision was made autonomously and based on individual economic considerations, for instance, as a reaction to market prices, changes in demand, or production costs. Even in highly transparent markets and with a small number of suppliers (oligopoly), parallel trends in prices or conditions are generally permissible provided there is no evidence of an agreement. The conduct only becomes problematic if additional factors such as mutual information exchange, informal meetings, or unusual market reactions occur, which can only be explained by coordination. Companies should document their internal processes so that they can demonstrate independent decision-making in the event of a review.
What role does proof of an agreement play in investigations into tacit parallel conduct?
Proof of an unlawful cartel agreement is the central element in the antitrust assessment of tacit parallel conduct. The burden of proof generally lies with the competent competition authority, which must demonstrate that the companies did not coordinate their behavior purely from observing the market, but as a result of conscious—albeit informal—collusion. Mere anomalies in market behavior are not sufficient; at least indications of communication or agreement must be demonstrated, such as records of meetings, email correspondence, statements from participants, or conspicuous coincidences lacking reasonable economic explanation. The Federal Court of Justice (BGH) and the European Court of Justice (ECJ) require a minimum amount of evidence, often in the form of circumstantial evidence, with the overall view of all circumstances being decisive. In the absence of such evidence, tacit parallel conduct remains permissible under antitrust law.
Can companies take preventive measures to ensure legal compliance in cases of tacit parallel conduct?
Companies can and should implement preventive measures to minimize legal risks in cases of tacit parallel conduct. An essential safeguard is clear internal documentation of economic decision-making reasons to be able to prove, if necessary, that all business measures were taken independently and without any agreement with competitors. Compliance programs, targeted employee training, and a restrictive communication policy towards competitors help to avoid even the appearance of coordination. Furthermore, companies—especially at industry meetings, trade fairs, or association work—should refrain from any communication about competition-sensitive topics (such as prices, capacities, market allocation) and ensure this through internal guidelines. Regular review of these measures by internal or external audits is advisable to rule out antitrust infringements in advance.
How does European case law assess tacit parallel conduct compared to German law?
European case law under Art. 101 TFEU is, overall, closely aligned with German antitrust law, but sometimes imposes stricter requirements for establishing concerted practices. The European Court of Justice (ECJ) has repeatedly emphasized that mere parallel market behavior does not constitute a cartel infringement unless there is ‘practical coordination’ or ‘consciously coordinated action.’ Here too, there must be some interaction between the companies, going beyond mere knowledge of competitors’ market behavior. However, under the European approach, it is already sufficient for there to be ‘contact’ that eliminates uncertainty about competitors’ conduct for a prohibited ‘concerted practice’ to be assumed. Thus, the threshold at which parallel conduct becomes inadmissible is sometimes lower than under German law, requiring companies in intra-European trade to exercise particular caution.
What is the importance of market transparency and interdependence in tacit parallel conduct?
Market transparency and interdependence are key factors in the antitrust assessment of tacit parallel conduct. In highly transparent markets with few suppliers, there is a high probability that companies will react similarly to identical market conditions, leading to parallel pricing or similar business strategies—even without any coordination. Interdependence refers to the close interaction between market participants, which is especially pronounced in oligopoly markets. Despite these structural factors, parallel conduct remains legally unproblematic as long as it is exclusively based on observation and rational adaptation to competitors. It only becomes problematic when additional communication or targeted coordination occurs. Competition authorities therefore carefully analyze whether the market structure plausibly explains parallel conduct or whether there are indicators of coordination exceeding the normal level. Companies should be aware of these circumstances and document their conduct and the underlying decision-making processes.
