Paris

Resale price maintenance: What is the standard?

Law & Economics workshop organised by Concurrences Review with Juliette Théry-Schultz (Autorité de la concurrence), in partnership with Allen & Overy and Positive Competition.

Florence Ninane

Article L. 410-2 of the French Commercial Code establishes the principle of free price fixing through competition and, at the same time, Article L. 420-1 prohibits cartels that tend to hinder price fixing through free market forces. It is, however, lawful for a manufacturer to determine maximum resale prices or recommended prices, provided that the nature of these indications is unambiguous and that these prices are not, in reality, imposed prices or minimum prices (Decision No. 05-D-66). Vertical Regulation 330/2010 specifies that vertical agreements which, directly or indirectly, in isolation or in combination with other factors under the control of the parties, have as their object the restriction of the buyer’s ability to determine its sale price constitute "black clauses". This does not prevent the supplier from imposing a maximum sale price or recommending a sale price. According to the Commission’s Guidelines on Vertical Restraints imposed selling prices are considered to be hardcore restrictions. They clarify that they are unlikely to be exempted under Article 101.3 TFEU. However, the Commission states that efficiencies can be demonstrated. For example, they may be useful in certain cases (e.g. period of launching a new product; franchise system to organise a low price campaign...). At the evidential level, a distinction must be made between prohibited agreements that may be characterised by a price alignment resulting from (i) a direct horizontal price agreement between distributors or (ii) an agreement between a supplier and each of its distributors around a resale price determined by the supplier to an alignment resulting from parallel behaviour arising from an identical reaction of the distributors to the dissemination of prices advised by the supplier which is not sanctioned. A practice of resale price collusion presupposes that an agreement is demonstrated between the supplier and its distributor. In Bayer v Commission, it was held that in order for an agreement to be deemed to be concluded by tacit acceptance, the manifestation of will on the part of one of the contracting parties with an anti-competitive aim must constitute an invitation to the other party, whether express or implied, to the joint attainment of such an aim. In Volkswagen AG v Commission, the Court of First Instance held that the fact that Volkswagen addressed three circulars to its German dealers to the effect that they should not grant discounts or restricted discounts to customers could not be regarded as an invitation to agree, accepted by the dealers. It could not be accepted that an unlawful contractual development could be regarded as having been accepted in advance when and by the signing of a lawful distribution contract. In Decision No 06-D-04 bis, the Competition Council held that, once the pricing policy which is the subject of an incentive addressed by the manufacturer to the distributors is actually accepted by the distributors, the agreement of will of the latter is demonstrated. In the absence of documents directly or indirectly establishing acceptance, effective compliance with the recommended prices is evidenced by the application of a three-step test to establish the agreement of will between a supplier and its distributor, on the basis of a bundle of serious, precise and concordant indications proving that: (1) The retail prices desired by the supplier are known to the distributors (dissemination of recommended resale prices); (2) A price policy exists to prevent deviant distributors from undermining the functioning of the cartel with price control and participation of distributors or consumers in price monitoring, threats of retaliation, coercive measures (late delivery, disruption of supplies, elimination of discounts etc); (3) Prices significantly applied by the distributors. A compliance rate of 80 % or more is sufficient. If the rate is less than 80 %, the actual dispersion of prices found should be taken into account to assess the concentration of prices close to the MIP: a low compliance rate with the MIP may still be compatible with price concentration if there is little price dispersion around the MIP. The three-step test has been used many times by the Authority (e.g.: Toy Affairs, Diddl ...). At the European level, there are historically few resale price maintenance cases handled by the Commission (appropriateness of prosecution). Recently, however, there has been renewed interest in the specific context of online sales, following the publication by the Commission in May 2017 of the results of its sector inquiry on e-commerce. The Commission uses a more "classical" evidential test than the ADLC based on documentary evidence. In 2018, the Asus, Philips, Pioneer, Denon & Marantz and Guess cases are to be identified.

Photos © Léo-Paul Ridet

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