Introduction
Background
Decision
Comment
In December 2011 the Market Court imposed a €3 million fine on Finnish design firm Iittala Group for minimum resale price maintenance which took place from 2005 to 2007. To date, this is the largest fine imposed for resale price maintenance in Finland.
According to the court, Iittala pressured retailers to follow its instructions on minimum prices for its products and decided maximum discount percentages, as well as the duration of sale campaigns. Common understanding on prices was formed either by signing product-specific agreements with specific minimum price/maximum discount terms or through oral agreements, email correspondence and compliance with the agreed price level. According to the Market Court, Iittala also threatened non-complying retailers that it would discontinue the supply of its products.
In April 2010 the Finnish Competition Authority (FCA) proposed that the Market Court impose a €4 million fine on Iittala for vertical price fixing. Iittala denied the allegations. According to Iittala, its conduct was unilateral and concerned non-binding price recommendations, which are not prohibited. Iittala stressed that in practice, retailers deviated from the recommended prices and Iittala did not penalise them. It also stated that even if its actions exceeded non-binding price recommendations, it had sufficient efficiency justifications in any case. Active pricing instructions were necessary to protect its brands and for motivating retailers in connection with a new, more open distribution model which enhanced availability of the products for consumers.
The court assessed the infringement separately for two groups of retailer:
- discount or specialty stores; and
- stores which belong to large retail chains.
Regarding the first group, the court found that Iittala and the retailers had entered into distribution agreements that allowed Iittala to recommend prices for the products. However, in most cases additional product-specific cooperation agreements were entered into and included minimum price provisions. The 'minimum price' was defined as the price in Iittala's catalogue or a maximum discount percentage of that price. Iittala also controlled the maximum campaign discounts and the duration of sale campaigns. Supply of the products was conditional on compliance with these terms.
According to the court, the common intent to be bound by the terms of the agreement between Iittala and the discount stores was indicated by Iittala sending the agreement to the store and the store signing the agreement. Iittala entered into such agreements with 87 retailers. The court noted that since there was an explicit agreement on sales prices, it was irrelevant whether the retailers had actually complied with the agreement.
Regarding the chain stores, the court noted that the retailers which belonged to large retail chains had refused to sign agreements with minimum price provisions with Iittala. However, the court found that Iittala and the retailers had reached an understanding on minimum prices and sale campaign terms through email correspondence, orally or by the retailers simply complying with the terms set by Iittala. Iittala had also controlled the actual prices applied by the retailers and actively persuaded the retailers to comply with the common price level.
The court did not accept Iittala's general claim about price recommendations. The court stressed that Iittala had demanded compliance with the set price level under threat of discontinuing the supply of its products, and had carried out this threat in certain cases.
When a company wishes to claim that its restrictive practice should be accepted due to efficiency arguments, it bears the burden of proving such efficiencies. The court found Iittala's claims insufficiently concrete and noted that there was very little actual evidence. However, the court did not reject the idea that efficiency arguments could be raised and confirmed that they should be assessed in a resale price maintenance case. Nevertheless, such assessment is possible only provided that the company has first presented compelling evidence.
The court found that Iittala's actions with different retailers were part of a larger strategy to increase or maintain prices, and constituted a continuous infringement which was serious by nature. The evidence showed that Iittala's intention was to raise the resale gross margin and the price level, and it was considered to be the leader in the arrangement. The court stressed that Iittala's actions were executed on an organisation-wide level. Its conduct was considered particularly harmful to consumers because resale price maintenance was likely to have increased the price level of the products concerned.
The case is significant because the Market Court made extensive reference to EU practice in its wide-ranging reasoning for the judgment. It clarified a number of questions where national case law had been lacking. The level of the fine also reflects the much harsher approach recently adopted by the national competition authorities.
For further information on this topic please contact Hanna Laurila or Toni Kalliokoski at Dittmar & Indrenius by telephone (+358 9 68 1700), fax (+358 9 65 2406) or email ([email protected] or [email protected]).