Parties to an allegedly price-fixing arrangement escape competition heavy fines as the Luxembourg Competition Authority applies the de minimis rule

Applying the de minimis doctrine in the Epicerie de Luxembourg case[1] the Luxembourg Competition Authority (LCA) refrained from penalizing the parties to a horizontal price-fixing agreement in the retail sector. The conducts of the parties were found to not have an appreciable competition impact; on the contrary, these conducts were expected to generate efficiency gains in terms of lower retail prices.

In 2015 four Luxembourg-based retailer operators, Alima, Massen, Food2Go and Pall Center, launched the common label ‘Epicerie de Luxembourg’(EDL). Under this label they run a website and also published a monthly leaflet, then replaced by a magazine. This magazine referenced on average 50 products offered at a promotional price jointly determined by the parties. The goal pursued by Alima, Massen, Food2Go and Pall Center with the creation of the EDL label was to improve their image and visibility in the retail markets by means of common marketing campaigns.

The first issue considered by the LCA to assess the legality of the challenged conducts was to determine the relevant market, which is an analytical tool to set whether the investigated firms compete with each other. The relevant product market was identified in the retail market for food products. To determine the boundaries of the relevant geographic market, the LCA used isochrones as the European Commission and other national competition authorities have already done. Generally speaking, retail markets are local in dimension as shoppers are not ready to travelling long distances to reach their preferred store. Thus, the LCA determined the catchment areas of each store of the parties using the isochrones it constructed on the basis of the patterns and preferences of clients and on whether there were stores of third parties close to those of the parties.

It should be noted from the outset that the LCA expunged from the relevant market the Food2Go’s shops. Because these shops were within the precinct of petrol stations they supplied a different type of clientele than retailers, falling outside the retail market for food products.

All the stores owned by the Alima were supermarkets located in the centre of Luxembourg Ville. These stores had a local clientele within a catchment area of a few hundred meters that did not comprise any of the other retailers using the EDL label. Hence, Massen and Pall Center did not exert any competition restraint on Alima, which belonged to a distinct relevant market.

The stores of Massen, a hypermarket, and Pall Center, a supermarket, were all situated in Northern Luxembourg at a distance of 30 kilometers covered in 30 minutes by car. Their catchment areas identified with the isochrones drafted by the LCA partially overlapped with some customers having the choice of go shopping at either of the above premises. The hypermarket of Massen and the supermarket of Pall Center were then in the same relevant geographic market.

Hence, the LCA limited its analysis only to the conducts of Massen and Pall Center. Initially, the LCA took the view that the Massen and Pall Center jointly setting promotional prices under the EDL label was a price-setting arrangement prohibited by Article 3 LCL, corresponding to Article 101 TFEU. That said, the LCA applied some mitigating circumstances to the conducts of Massen and Pall Center.

First, the feared negative effects on competition would concern only a small sparsely populated area that accounted for an insignificant portion of the turnover of Massen and Pall Crnter. Second, also the revenue of the products marketed under the EDL label was rather trivial if compared with the parties’ overall turnover. Third, on a more careful examination, the LCA pointed out that the purpose of Massen and Pall Center when they created the EDL label was to organize a marketing campaign with the objective to cut advertising costs. Therefore, such arrangement is closer to a horizontal cooperation agreement than to a price-setting agreement as the LCA previously held. Fourth and lastly, the expected saving on advertisement costs might strength competition between Massen and Pall Center, on one side, and with their competing retailers, on the other side.

Factoring in all these circumstances, the LCA arrived at the conclusion that the anti-competitive agreement not only had insignificant and marginal negative effects on competition; but it also might have pro-competitive effects lowering retail prices for consumers. Therefore, the LCA took the position that a symbolic or no competition fine at all should be levied on Massen and Pall Center.

In practice, in Epicerie de Luxembourg the LCA looked at the economic effects of the agreement under investigation. In what it seems an application of the de minimis doctrine, it found that such effects were below the threshold requiring competition law enforcement. Indeed, the marginal negative effects on competition could be set off by the expected efficiency gains, which ultimately accrued to consumers. It may also be argued that Epicerie de Luxembourg cannot be considered as an application of the de minimis rule to a competition restraint by object. Indeed, in the LCA the conducts of Massen and Pall Center should be qualified as cooperation agreement rather than as a price-fixing arrangement.  

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[1] Conseil de la Concurrence (Luxembourg Competition Authority), decision of 13 June 2018 no. 2018-FO-02, Epicerie de Luxembourg, www.concurrence.lu.