On June 29, 2023, the Court of Justice ruled on questions referred by the Lisbon Court of Appeals relating to alleged resale price maintenance (“RPM”) by Super Bock, a Portuguese beverage manufacturer.[1] The Court of Justice held, inter alia, that a vertical agreement fixing minimum prices is not necessarily a restriction of competition by object despite its characterization as a “hardcore restriction” under the Vertical Block Exemption Regulation (“VBER”)[2] and, in certain circumstances, the existence of an agreement may be inferred from “explicit or tacit acquiescence” by the distributors to an invitation to comply with minimum resale prices.[3]
Background
The Portuguese Competition Authority (Autoridade da Concorrência, “AdC”) found that Super Bock fixed minimum resale prices for its distributors between at least May 15, 2006 and January 23, 2017 and imposed fines totaling €24 million on it, a member of its board, and a senior commercial director. [4] The addressees appealed against AdC’s decision, and the Lisbon Court of Appeal made a reference to the Court of Justice that led to the present ruling.
Restriction of competition by object
The referring court asked whether RPM constitutes in and of itself an infringement “by object” such that it is unnecessary to examine its effects.
The Court of Justice answered this in the negative, holding that the categorization of RPM as a “hardcore” restriction under the VBER does not necessarily mean that it constitutes a restriction “by object” as the two concepts are distinct and “do not necessarily overlap.”[5]
Accordingly, to determine whether a vertical agreement fixing minimum prices constitutes a restriction of competition by object, one must examine the content of its provisions, its objectives and the economic and legal context of which it forms a part (including the nature of the affected goods or services, as well as the actual conditions of the functioning and structure of the market or markets in question), and its procompetitive effects (where these are put forward by the parties).[6]
The concept and proof of an “agreement”
The referring court also asked whether the necessary “agreement” within the meaning of Article 101(1) TFEU could be established on the facts of the case.[7]
The Court of Justice held that an agreement cannot be based on a “statement of a purely unilateral policy” of one party to a distribution contract.[8] However, an apparently unilateral act could constitute an agreement: (i) if the distribution contract contains an express invitation to comply with minimum resale prices or authorizes the supplier to impose those prices; or (ii) through the “explicit or tacit acquiescence” by the distributors to an invitation to comply with minimum resale prices.[9]
The Court of Justice held that RPM could be established where a supplier: (i) regularly transmitted to distributors minimum prices lists; (ii) monitored the distributors’ prices; (iii) asked them to comply with those prices on pain of retaliatory measures, such as the removal of trade discounts on purchases and the refusal to supply and replenish stocks; and, crucially, (iv) where the distributors in fact applied the transmitted prices, rather than “any other prices on their own initiative.”[10] These elements could be established, in the absence of direct evidence, on the basis of “objective and consistent indicia.”[11]
Discussion
The Court of Justice’s ruling that an agreement fixing minimum resale prices does not constitute in and of itself a restriction of competition by object under Article 101(1) TFEU represents a welcome move away from the rigid formalism mandated by Binon, its earlier judgment on RPM.[12] The ruling provides greater scope for businesses to justify their practices by reference to their objectives, and the wider economic and legal context.[13]
The Court of Justice ruling helpfully distinguishes between permissible resale price recommendations, and impermissible RPM. The facts of this case conform with the archetypal RPM case: the communication of minimum resale prices by the supplier to the distributors, coupled with monitoring and follow-ups backed by threats or retaliatory measures (or incentives) to enforce compliance.
In recent years, certain national competition agencies have shown an apparent willingness to pursue cases that test the limits of the law (e.g., where repeated price recommendations were not accompanied by threats or incentives, and in the absence of an explicit agreement to fix prices).[14] Such an expansive approach runs counter to the VBER’s clear provision that resale price recommendations are legitimate unless they are accompanied by threats or incentives.[15] The Court of Justice’s ruling indicates that an RPM finding cannot be based purely on whether a distributor happens to consider it opportune, for whatever reasons at given moments, to apply a price in accordance with the recommendation of the supplier. As the Court of Justice held, no acquiescence to the prices communicated by the supplier could be established if the distributors are able or free to “apply other prices on their own initiative” and the case apparently involved a situation where “minimum resale prices are, in practice, followed by the distributors”.[16] This suggests that only consistent and unswerving compliance, across the board or without significant deviation, can be taken as expression of consent to be bound. Any other conclusion would lead to the absurd result that a price recommendation would be lawful only if a distributor ignores it.
[1] Super Bock Bebidas v. Autoridade da Concorrência (Case C‑211/22) EU:C:2023:529 (“Super Bock”).
[2] Commission Regulation (EU) No 330/2010 of 20 April 2010 on the application of Article 101(3) of the Treaty of the Functioning of the European Union to categories of vertical agreements and concerted practices, OJ 2010 L 102 (23.04.2010), Article 4(a). Note that a new VBER came into force on June 1, 2022 (see Commission Regulation (EU) No 2022/720 of 10 May 2022 on the application of Article 101(3) of the Treaty on the Functioning of the European Union to categories of vertical agreements and concerted practices, OJ 2022 L 134/4 (11.05.2022)).
[3] Super Bock, para. 53.
[4] AdC Press Release 15/2019, “AdC sanctioned Super Bock for fixing minimum resale prices in hotels, restaurants and cafes,” July 24, 2019. The fines imposed on the board member and the senior commercial director were €8,000 and €12,000, respectively.
[5] Super Bock, para. 41.
[6] Ibid., paras. 34–36.
[7] Ibid., para. 44.
[8] Ibid., para. 48.
[9] Ibid., paras. 49–50.
[10] Ibid., para. 52.
[11] Ibid., paras. 14 and 58.
[12] Binon v. SA Agence et messageries de la presse (Case 243/83) EU:C:1985:284, paras. 43–45 (“Binon”).
[13] In the case of consumer electronics, for instance, where new models are frequently introduced and prices rapidly decline after introduction, resale margins may erode so quickly as to undermine resellers’ incentives to invest in effective marketing of the products, depriving suppliers of effective outlets, and depriving consumers of retailers that put effort into selling the products to them. In such an environment, repeat resale price recommendations may be treated with greater understanding than in more static markets with substantial retail margins and more stable price levels.
[14] See, e.g., our Cleary Antitrust Watch post “The French Competition Authority Dismisses a Retail Price Maintenance Case Against Kärcher, Closing a Ten-year-Long Investigation”, June 24, 2021. In that case, ultimately, the absence of pressure exercised by Kärcher on retailers was key in the French Competition Authority’s finding that Kärcher did not invite retailers to apply its recommended prices.
[15] VBER, Article 4(a): “The exemption provided for in Article 2 shall not apply to vertical agreements which […] have as their object: the restriction of the buyer’s ability to determine its sale price, without prejudice to the possibility of the supplier to impose a maximum sale price or recommend a sale price, provided that they do not amount to a fixed or minimum sale price as a result of pressure from, or incentives offered by, any of the parties.”(emphasis added)
[16] Super Bock Bebidas v. Autoridade da Concorrência (Case C‑211/22) EU:C:2023:529, para. 52.