On 22 March 2017, the Belgian Competition Authority imposed a fine of almost € 5.5 million on a yeast producer and its parent companies for resale price maintenance and for hindering competition from low-price brands of fresh yeast. It is the first time that the BCA imposes (important) fines for vertical price fixing.
On 22 March 2017, the Belgian Competition Authority (“BCA”) imposed a fine of almost € 5.5 million on Algist Bruggeman NV and its parent companies (“Algist”) for resale price maintenance and for hindering competition from low-price brands of fresh yeast.
Algist is Belgium’s largest supplier of yeast products, supplying industrial, semi-artisan and artisan bakeries. It sells its products directly to large industrial bakeries, but for semi-artisan and artisan bakeries it sells through an extensive network of distributors.
The BCA conducted inspections at the premises of Algist and one of its distributors. On the basis of the evidence collected, the BCA concluded that Algist had infringed Belgian and EU competition law by imposing minimum resale prices upon its distributors between 2008 and 2013. Algist had issued recommended resale prices which in practice were binding on its distributors because any discounts on the recommended prices required Algist’s prior approval.
The BCA considered that this amounted to fixing minimum resale prices. It concluded that such minimum resale prices are liable to significantly reduce intra-brand competition (i.e. competition between different distributors of the same brand), as distributors are no longer incentivised to compete with one another on price. As a consequence, price levels tend to be more stable, which allows distributors to achieve higher margins.
The BCA also held that Algist sought to reduce inter-brand competition, i.e. competition (on price, quality and performance) among different brands in the portfolio of a single distributor. The BCA considered that Algist aimed to reduce competition on price by other brands by granting its distributors individualised year-end, exclusivity and fidelity discounts. Algist also concluded exclusive long-term supply agreements with bakeries and allowed for exceptional selective resale price discounts for certain bakeries which intended to switch to a low-price brand. These measures were paired with (threats of) sanctions in case of non-compliance.
The BCA considered that such behaviour is caught by both the cartel prohibition and the prohibition of abuse of a dominant position under Belgian and EU competition law. Algist has reached a settlement with the BCA and therefore obtained a reduction of 10% of its fine. A settlement decision is final. It entails recognition by Algist of their infringement and cannot in principle be appealed.
Three things one should take away from this case:
- The decision marks the first occasion on which the BCA has imposed (important) fines for resale price maintenance.
- It is expected that the BCA will tackle other vertical infringement cases (such as resale price maintenance cases), considering that distribution agreements and relations with suppliers are a policy priority of the BCA for 2017 (See the BCA’s priority policy here in Dutch or in French).
- This competition law infringement may expose Algist to damages claims from parties who have suffered from its behaviour.
The full text of the decision of 22 March 2017 can be found here (available only in Dutch).