Signalling may take place when a company publicly announces its intentions of future behaviour in the market. Such announcements may relate to future price changes, new product offerings, the establishment of new stores or a number of other factors. Public price announcements may be pro-competitive, as they create transparency in the market to the benefit of customers. However, they may also reduce uncertainty as to how market players will behave in the market. There appears to be a growing concern that signalling may lead to coordination between market players, and thus restricting competition.
In a market with effective competition, each market actor will unilaterally decide the price at which it offers its goods or services. Uncertainty as to the future behaviour of competitors is considered a prerequisite for individual decision making. When a company publicly announces its future strategies, i.e. in relation to pricing or other factors of relevance to competition, this may reduce the incentive to compete. Use of the media in this regard, may pose a particular threat as different channels such as newspaper articles, interviews and social media provide easy access to a large number of competitors.
Recent developments may indicate that an increasing number of cases may be investigated from a signalling perspective. If so, companies may expect to have their actions in the public sphere more closely examined than what has previously been the case.
The topic is more closely examined in the latest edition of the European Competition and Regulatory Law Review here (subscription only)