On 26 July 2016, the Luxembourg Competition Council ("Conseil de la Concurrence") issued a decision in which it stressed that a resale price maintenance ("RPM") practice, i.e. an agreement or concerted practice between a supplier and a distributor leading to fixed or minimum prices for end users, constitutes a hard core and "by object" violation of EU and/or Luxembourg competition rules.
Clarification of applicable criteria
The Competition Council clarified the applicable criteria, which will undoubtedly help companies to (better) assess whether their practices constitute an illegal RPM practice. Such criteria are most welcome. Indeed, even though the European Commission has provided some guidance on RPM practices in its 2010 Guidelines on Vertical Restraints, it is sometimes very hard to distinguish between, on the one hand, illegal RPM practices leading to minimum or fixed prices and, on the other hand, recommended prices which are in principle allowed under competition law.
The relevant criteria of the Competition Council are the following (and are also those applied by the French Competition Authority ("Autorité de la Concurrence")):
- the existence of a resale price that has been communicated or discussed between supplier and distributor;
This condition will thus also be met if the resale price is officially presented by the supplier as a recommended price.
- the existence of a pricing policy or, as the case may be, of price monitoring;
This condition will of course be met when the supplier threatens the distributor to respect the communicated resale prices, yet this will also be the case when the distributor's competitors denounce non-compliance with such pricing levels or when the supplier simply reminds the distributor about the applicable resale prices. A regular pricing monitoring would also be sufficient to meet this condition, but it is evident that the frequency of the monitoring will play a role here (weekly or monthly pricing monitoring being a more serious indication of RPM practices than a yearly pricing monitoring).
- the significant application by the distributor of the communicated resale prices.
The question that arises in this context is of course what constitutes "significant" application. In accordance with the case law of the French Court of Appeal, the application of communicated resale prices is significant when the distributor follows those prices (or prices that deviate slightly therefrom) in 80% of the cases. It cannot be excluded though that the Luxembourg Competition Council would also accept a lower percentage (but probably above 50%).
Leniency programme also for vertical practices
In the official communication with respect to such decision of 26 July 2016, the Competition Council further clarified that its leniency programme is also open for vertical cases and for RPM practices in particular. Such position of the Luxembourg Competition Council is contrary to the general approach of national competition authorities within the European Competition Network, but is fully understandable given its limited resources. Opening the leniency programme to vertical RPM cases may lead to an important amount of leniency applications, which would facilitate the enforcement activities of the Competition Council, especially in priority sectors such as the fast moving consumer goods sector.