Hard core cartel.

OECD, Report, Hard Core Cartels: Third Report on the implementation of the 1998 Council Recommendation (2005): “A ‘hard core cartel’ is an anticompetitive agreement, anticompetitive concerted practice, or anticompetitive arrangement by competitors to fix prices, make rigged bids (collusive tenders), establish output restrictions or quotas, or share or divide markets by allocating customers, suppliers, territories, or lines of commerce.” 

OECD, Cartels and Anti-competitive Agreements: “Hard core cartels (when firms agree not to compete with one another) are the most serious violations of competition law.  They injure customers by raising prices and restricting supply, thus making goods and services completely unavailable to some purchasers and unnecessarily expensive for others.  The categories of conduct most often defined as hard core cartels are: price fixing, output restrictions, market allocation, bid rigging (the submission of collusive tenders).”

International Competition Network, Report, Defining Hard Core Cartel Conduct (2005): “The basic concepts of a cartel found in statutes and policy statements are nearly universal; a cartel is defined as an agreement between competitors to restrict competition. Further, the categories of conduct most often defined as “hard core” are also consistent: they are price fixing, output restrictions, market allocation, and bid rigging.” 

See also OECD, Recommendations of the Council Concerning Effective Action Against Hard Core Cartels (1998).

Herfindahl-Hirschman Index (HHI).

A formula to calculate market concentration in merger analysis.

European Commission, Guidelines on the assessment of horizontal mergers: “The overall concentration level in a market may also provide useful information about the competitive situation.  In order to measure concentration levels, the Commission often applies the Herfindahl-Hirschman Index (HHI). The HHI is calculated by summing the squares of the individual market shares of all the firms in the market.  The HHI gives proportionately greater weight to the market shares of the larger firms.  Although it is best to include all firms in the calculation, lack of information about very small firms may not be important because such firms do not affect the HHI significantly.  While the absolute level of the HHI can give an initial indication of the competitive pressure in the market post-merger, the change in the HHI (known as the ‘delta’) is a useful proxy for the change in concentration directly brought about by the merger.”

OECD, Policy Roundtable, Market Definition (2012): “When a relevant market has been defined, the competitors can be identified and market shares can be assigned to the market participants.  These market shares can be used to derive statistical measures of the concentration in the market for example by calculating concentration ratios or the Herfindahl-Hirschman Index (HHI), the sum of the squared market shares of all firms in the market.  These market shares and the associated measures of concentration are employed to make inferences about the market power of a firm, or, stated otherwise, the strength of the competitive constraints a firm faces.  The underlying assumption is that the size of the market share is directly and positively correlated with market power and that the degree of concentration in a market is indicative of competition problems, for example in the form of higher prices than in less concentrated industries.”

History sniffing.

A behavioural advertising term.

U.S. Federal Trade Commission, news release, “FTC Settlement Puts an End to ‘History Sniffing’ by Online Advertising Network Charged With Deceptively Gathering Data on Consumers”:  “An online advertising company agreed to settle Federal Trade Commission charges that it used ‘history sniffing’ to secretly and illegally gather data from millions of consumers about their interest in sensitive medical and financial issues ranging from fertility and incontinence to debt relief and personal bankruptcy.  The FTC settlement order bars the company, Epic Marketplace Inc., from continuing to use history sniffing technology, which allows online operators to ‘sniff’ a browser to see what sites consumers have visited in the past.  It also bars future misrepresentations by Epic and requires the company to destroy information that it gathered unlawfully.  Consumers searching the Internet shouldn’t have to worry about whether someone is going to go sniffing through the sensitive, personal details of their browsing history without their knowledge,’ said FTC Chairman Jon Leibowitz.  ‘This type of unscrupulous behavior undermines consumers’ confidence, and we won’t tolerate it.’
Epic Marketplace is a large advertising network that has a presence on 45,000 websites.  Consumers who visited any of the network’s sites received a cookie, which stored information about their online practices including sites they visited and the ads they viewed.  The cookies allowed Epic to serve consumers ads targeted to their interests, a practice known as online behavioral advertising.”

Homogenous product.

Competition Bureau, Merger Enforcement Guidelines (2011):  “[A product with] no unique physical characteristics or perceived attributes.”

Horizontal agreement.

European Commission, Guidelines on horizontal cooperation agreements (2011): “Co-operation is of a ‘horizontal nature’ if an agreement is entered into between actual or potential competitors.”

OECD, Reviews of Regulatory Reform, Regulatory Reform in Canada, The Role of Competition Policy in Regulatory Reform (2002): “[Horizontal agreements]are those that prevent rivalry about the fundamental dynamics of market competition, price and output. Most contemporary competition laws treat naked agreements to fix prices, limit output, rig bids, or divide markets very harshly. To enforce such agreements, competitors may also agree on tactics to prevent new competition or to discipline firms that do not go along; thus, the laws also try to prevent and punish boycotts. Horizontal co-operation on other issues, such as product standards, research, and quality, may also affect competition, but whether the effect is positive or negative can depend on market conditions. Thus, most laws deal with these other kinds of agreement by assessing a larger range of possible benefits and harms, or by trying to design more detailed rules to identify and exempt beneficial conduct.”

Horizontal merger.

Competition Bureau, Merger Enforcement Guidelines: “… mergers of firms that supply competing products (horizontal mergers) …”

OECD, Policy Roundtable, Vertical Mergers (2007): “A horizontal merger occurs when the products of the merging firms are in the same antitrust market, i.e., might exert a significant competitive restraint upon each other pre-merger.”

U.S. Federal Trade Commission, Guide to the Antitrust Laws: “There are two ways that a merger between competitors can lessen competition and harm consumers: (1) by creating or enhancing the ability of the remaining firms to act in a coordinated way on some competitive dimension (coordinated interaction), or (2) by permitting the merged firm to raise prices profitably on its own (unilateral effect).  In either case, consumers may face higher prices, lower quality, reduced service, or fewer choices as a result of the merger. … A horizontal merger eliminates a competitor, and may change the competitive environment so that the remaining firms could or could more easily coordinate on price, output, capacity, or other dimension of competition. As a starting point, the agencies look to market concentration as a measure of the number of competitors and their relative size.  Mergers occurring in industries with high shares in at least one market usually require additional analysis.”

Horizontal restraint.

Antitrust Law Developments (5th), Volume I, p. 79: “Horizontal restraints consist of restrictions established by agreements among actual or potential competitors.  This is in contrast to vertical restraints, which involve restrictions imposed by a firm at one level of the market on firms at a different level (e.g., restrictions imposed by a manufacturer on its distributors).  Characterizing a restraint as horizontal or vertical can be critical, because horizontal restrictions are more likely than vertical restraints to be viewed as per se unlawful.”

Business Electronics Corp. v. Sharp Electronics Corp., 485 U.S. 717 at 730 (1988): “[r]estraints imposed by agreement between competitors have traditionally been denominated as horizontal restraints, and those imposed by agreement between firms at different levels of distribution as vertical restraints.”

Thomas B. Leary, Commissioner, Federal Trade Commission, “A Structured Outline for the Analysis of Horizontal Agreements”: “An agreement between actual or potential competitors to restrain their rivalry in some respect is commonly called a ‘horizontal restraint.’  This kind of agreement should be distinguished from so-called ‘vertical’ restraints that govern the interface between supplier and customers (who may also be competitors in another capacity). The distinction is fundamental because horizontal and vertical restraints are analyzed in different ways.  The most significant difference is that horizontal restraints are more likely to be deemed illegal per se and vertical restraints are more likely to be subject to the ‘rule of reason.’”

Hot document.

A “hot document” in competition/antitrust law terms generally refers to a company’s or companies’ own internal company documents that state or suggest that conduct violates or raises issues under competition/antitrust laws.  Examples can include internal documents (or e-mails or other electronic communications) that indicate that companies are engaging in price-fixing or other cartel conduct, business activities are being engaged in for anti-competitive rather than pro-competitive or efficiency enhancing purposes or that a merger is intended / will likely have adverse effects on competition.  “Hot document” reviews by a target’s counsel are commonly part of document reviews in, for example, cartel investigations in assessing the strength of an investigative agency’s case and potential settlement and litigation options.

U.S. Federal Trade Commission, 2012 Horizontal Merger Investigation Update Report (2013):  [mergers]:  “A document is ‘hot’ if it predicts that the merger will produce an adverse price or non-price effect on competition.  The most obvious situation involves acquiring party documents that predict a price effect stemming from the merger.  The price effect is not necessarily quantified and may be qualified by the use of words such as ‘likely’ or ‘possible.’  Alternatively, a document might indicate that the recent entry of the acquired party blocked the incumbent’s plans to raise price, instead forcing a small but significant price reduction.  On occasion, the evidence relates to non-price competition, for example, when the documents indicate a merger might delay the acquiring firm’s need to add capacity.  Documentary recognition of close competition between the merging parties is not sufficient to qualify for ‘hot document’ status, because a range of other factors could preclude a price effect.”

Hub-and-spoke conspiracy. 

In Re: Electronic Books Antitrust Litigation, 11 MD 2293 (DLC), citing Howard Hess Dental Laboratories Inc. v. Dentsply Int’l, Inc., 602 F.3d 237, 255 (3d Cir. 2010): “A hub-and-spoke conspiracy ‘involves a hub, generally the dominant purchaser or supplier in the relevant market, and the spokes, made up of the distributors involved in the conspiracy.  The rim of the wheel is the connecting agreements among the horizontal competitors (distributors) that form the spokes.”

Antitrust Law Developments (Fifth), Volume I, p. 24:  “In the paradigmatic case, a hub-and-spoke conspiracy involves a ringleader who is the dominant purchaser or supplier in the relevant market; this is the hub.  The hub  enters into a series of agreements with its distributors or suppliers, who are the spokes.  What makes the series of agreements an actionable conspiracy … is some set of facts that shows a connecting agreement among the horizontal competitors that form the spokes; this is the ‘rim’ of the wheel.”

Freshfields Bruckhaus Deringer, Global antitrust in 2012: 10 key themes: “Often in conjunction with RPM, several national European authorities are increasingly investigating potential hub-and-spoke theories of harm, where two horizontal competitors are alleged to collude through the intermediary of a common vertical relationship, typically a customer.”

Hypothetical monopolist test.

One approach used by competition/antitrust enforcement agencies to define relevant markets.

Competition Bureau, Merger Enforcement Guidelines: “Conceptually, a relevant market is defined as the smallest group of products, including at least one product of the merging parties, and the smallest geographic area, in which a sole profit-maximizing seller (a “hypothetical monopolist”) would impose and sustain a small but significant and non-transitory increase in price (“SSNIP”) above levels that would likely exist in the absence of the merger.  In most cases, the Bureau considers a five percent price increase to be significant and a one-year period to be non-transitory. Market characteristics may support using a different price increase or time period. … The market definition analysis begins by postulating a candidate market for each product of the merging parties. For each candidate market, the analysis proceeds by determining whether a hypothetical monopolist controlling the group of products in that candidate market would profitably impose a SSNIP, assuming the terms of sale of all other products remained constant.  If the price increase would likely cause buyers to switch their purchases to other products in sufficient quantity to render the price increase unprofitable, the postulated candidate market is not the relevant market, and the next-best substitute is added to the candidate market.  The analysis then repeats by determining whether a hypothetical monopolist controlling the set of products in the expanded candidate market would profitably impose a SSNIP. This process continues until the point at which the hypothetical monopolist would impose and sustain the price increase for at least one product of the merging parties in the candidate market. In general, the smallest set of products in which the price increase can be sustained is defined as the relevant product market.”

U.S. Department of Justice and Federal Trade Commission, Horizontal Merger Guidelines (2010): “The Agencies employ the hypothetical monopolist test to evaluate whether groups of products in candidate markets are sufficiently broad to constitute relevant antitrust markets.  The Agencies use the hypothetical monopolist test to identify a set of products that are reasonably interchangeable with a product sold by one of the merging firms.  The hypothetical monopolist test requires that a product market contain enough substitute products so that it could be subject to post-merger exercise of market power significantly exceeding that existing absent the merger. Specifically, the test requires that a hypothetical profit-maximizing firm, not subject to price regulation, that was the only present and future seller of those products (“hypothetical monopolist”) likely would impose at least a small but significant and non-transitory increase in price (“SSNIP”) on at least one product in the market, including at least one product sold by one of the merging firms. For the purpose of analyzing this issue, the terms of sale of products outside the candidate market are held constant. The SSNIP is employed solely as a methodological tool for performing the hypothetical monopolist test; it is not a tolerance level for price increases resulting from a merger.”

OECD, Policy Roundtable, Market Definition (2012): “The Hypothetical Monopolist Test (HMT) was introduced as a tool for competition analysis in the US Horizontal Merger Guidelines in 1982, but the conceptual idea can be traced back to 1956.26  This method for defining the relevant market is now employed by most jurisdictions and after thirty years of application to many cases, this concept has achieved a broad consensus as the most convincing approach to market definition.  The HMT is usually defined in a horizontal merger context, but it is considered to be the correct method to define relevant markets for all types of potential competition law abuses. The basic idea of the HMT is quite simple.  Shares in a designated market provide a reliable indication of market power only if at least a firm with a market share of 100% in that designated market, (a monopolist), is able to exercise market power.  In other words, if even a monopolist could not profitably increase the price above the competitive level, firms with market shares below 100% would certainly not be able to do so either.  If that is the case, firms will not have any market power and the market shares determined in the designated market will be meaningless.  In the past thirty years, some minor modifications to the HMT were made, but the main concept remains the same as when it was introduced in 1982.”



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    I am a competition and advertising lawyer based in Toronto who blogs on competition and advertising law and interesting legal and policy developments relating to business, white-collar crime, corruption and Internet and new media law.

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