For the first time since the 2003 Modernisation, the Italian Antitrust Authority puts under scrutiny vertical restraints. Straightforward RPM is investigated, following anonymous complaint. Possible horizontal effects are included in the scope of the investigation.
On 22 October 2013 the Italian Antitrust Authority (“IAA”) has launched an investigation on the direct imposition of vertical prices imposed by Power-One Italy, a manufacture of inverters used to change direct current to alternating current produced by photovoltaic and wind power plants. It is the first vertical agreement investigated by the IAA since the modernization of the antitrust regime in 2003.
The investigation originated by an anonymous complaint received by the IAA consisting in a letter on “Mininum Reselling Prices”, whereby the Vice President of Power-One Italy reminds to the distributors, resellers and partners that starting from January 2012 it has been introduced “a minimum reselling price in all our price lists”. The letter further explained that “the reasons for that choice were the following: 1) Avoid wrong pricing positioning of Power One inverters in the market; 2) Ensure a proper operating margin to our entire distribution channel. There is no doubt in my mind that this initiative has contributed to your success during current year; 3) Avoid a pricing war within our own channel which would only damage our company and its image in the market place; 4) Stimulate our partners to sell their own value add instead of using pricing leverage on the Power One inverters to fight other partners of Power One”. Finally, the letter clarified that “Once again we reiterate the request to respect this simple rule without exception. I am sorry to say that ignoring this indication will result in the interruption of the business relationship with Power-One”.
Other relevant documentation submitted by the complainant included a copy of a standard agreement imposing on the resellers the duty to the respect price conditions indicated in the producer’s price lists.
The IAA has indicated that the vertical restriction imposed by Power One has to be evaluated in the markets of production and distribution of inverters and other components for photovoltaic and wind power plants. According to the IAA, the production market should be considered worldwide in scope, whereas the distribution market has a national or even a local dimension since the manufactures need to establish a local distribution network in order to offer pre and post sale services.
The investigation is focussed on evaluating whether the RPM system imposed by Power-One Italy could be in contrast with art. 101 TFEU. The IAA has specified that the analysis will be conducted according to Regulation (EU) 330/2010 and the Guidelines on Vertical Restraints. The IAA has also reminded that being the RPM an hardcore restriction, it could not be considered de minimis according to the principles set forth in the De Minimis Notice.
Interestingly, other than noting that RPM may have a price increase effect, the IAA pointed out the risk of increased collusion between manufactures especially if they use the same distributors as it is in the case under investigation. However, the IAA also mentioned the possibility that even RPM may benefit from an individual exemption.
The opening of this investigation by the IAA confirms that RPM is the hot topic of this period. In September 2013, the OFT has issued two Statement of Objections against a manufacturer of sports bras and three UK department stores alleging that they have infringed competition law by entering into resale price maintenance agreement. In the same month a second Statement of Objections against a manufacturer of mobility scooters and some of its retailers for the same infringement was issued by the OFT. On 3 September 2013, the Austrian Cartel Court imposed a fine against Voralberger Muhlen for agreeing consumer prices with a number of retailers for flour, grit and bread mix products. On 1 August 2013, the Shangai Higher Court delivered its final ruling in the case Rainbow v. Johnson & Johnson, the first private antitrust litigation in China involving vertical agreements. The Court ruled that the RPM program enforced by Johnson & Johnson was anticompetitive ordering to pay damages to Rainbow.
The peculiarity of the Italian case is that it concerns intermediary products and that possible horizontal aspects will also be investigated.
It is then clear that national antitrust authorities are widening the scope of their attention to restrictive practices different from cartels: also vertical restrictions can fall under scrutiny by public enforcers. More than ever is therefore advisable to verify whether pricing distribution policies comply with competition rules.