The Luxembourg Competition Authority targets a resale price maintenance practice

On 26 July 2016 the Luxembourg Competition Authority, Conseil de la Concurrence, (LCA) has closed an investigation into a resale price maintenance agreement (RPM), opened in the case SCAB Giardino Spa (Giardino)[1], with a no-infringement decision. By this decision the LCA clarified that an RPM agreement is a competition restraint by object but it did not penalize the firms under investigation because it failed to establish that the supplier and distributor put in place such restrictive agreement. Finally, the LCA reminded that also vertical agreements, such as RPM agreements, fell within the scope of application of the Luxembourg leniency programme.

The facts of the case

Peter Pin Sarl (PP) was a Luxembourg-based retailer of furniture and home décor. One day in 2014, a shop assistant of PP refused to grant a rebate to a customer interested in buying some pieces of furniture produced by the Italian manufacturer, SCAB Giardino Spa (Giardino). Unfortunately for PP, the prospective customer was a member of the LCA that, unsurprisingly, on 8^th December 2016 opened an investigation against PP. The target of the LCA investigation was to ascertain whether the PP conduct amounted to a competition infringement for the purpose of Article 101 TFEU and Article 3 of the Luxembourg Competition Act (LC Act) of 23^rd October 2011. The theory of competition harm considered by the LCA was that PP refused to grant the requested rebate because it was banned from applying lower selling prices by the RPM agreement the distributor had concluded with Giardino.

The directors and employees of PP interviewed by LCA said that all furniture manufacturers quoted in their catalogues recommended retail prices without giving a clear written indication that such prices were minimum prices or prices imposed by producers. According to the PP’s director, if PP did not apply the prices quoted by Giardino, PP would run the risk of being no more supplied by Giardino. However, PP refused to make a written statement to that effect. Giardino denied that it had ever entered into a written agreement with PP and contended that the prices quoted to PP did have any legally binding force. Giardino added that the quoted prices were only recommended or indicative prices and that PP was free to apply lower prices. The Giardino’s statement were not contradicted by the evidence collected by the Italian Competition Authority at the Italian premises of the supplier.   

The decision of the Conseil de la Concurrence

First, in Giardino the LCA endorsed the strict formal approach of the European Commission and qualified RPM agreements as a competition restraint by object. Second, the LCA embraced the methodology followed by the French Competition Authority (FCA) to establish a RPM agreement[2]. When a direct proof of a vertical restraint cannot be found, the existence of a RPM agreement can be inferred from a set of indirect evidence provided that are serious, precise and concurring showing the following factors and circumstances:

·       Suppliers and distributors have discussed resale prices;

·       A pricing policy or a mechanism for monitoring compliance with pricing policies has been put in place;

·       The distributor has effectively applied the resale prices discussed with the supplier.

In order to establish a RPM agreement, it is sufficient to adduce a set indirect evidence to the evidentiary standard developed by the FCA showing the subsistence of all the above factors and circumstances has to be adduced. On the basis what reported above, the LCA took the position that the direct proof of the RPM agreement between PP and Giardino was not reached. Therefore, the LCA relied on the FCA three-limb methodology in case of lack of direct proof of the restrictive agreement. The LCA started by noting that in Giardino whether the parties discussed the recommended prices was uncontroversial. Alike, the circumstance that the prices were effectively applied by PP was not controversial. Yet, the evidence of a pricing policy could not be adduced. For this reason, the LCA concluded that no evidence of a competition infringement was given and it closed the investigation with a non-infringement decision.  

However, the LCA reminded distributors that RPM agreements are competition restraints by object with the result that RPM clauses are void. Distributors can then rely on a competition law defence to reject the pressure suppliers may exert on them to comply with the RPM arrangements. In addition, the LCA outlined that the leniency programme under the Luxembourg competition regime, contrary to those adopted by the European Commission and by most of the national competition authorities of the EU Member States, also applies to vertical agreements, including RPM arrangements. This extensive application of the Luxembourg national leniency programme might strengthen the enforcement of competition rules with regard to vertical restrictive agreements that the LCA believed that they are a business practice systematically put in place by undertakings to the detriment of competition and consumers.

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[1] Conseil de la Concurrence, Decision no. 2016-AS-05 of 26 July 2016, SCAB Giardino Spa, available at http://www.concurrence.public.lu/fr/decisions/ententes/2016/decision-2016-as-05/Decision-2016-AS-05-version-non-confidentielle.pdf.

[2] Court of Appeal of Paris, judgment of 26 November 2014, Beauté Prestige International.