In the course of recent enforcement activities the FCA has observed wide spread practices in vertical and trilateral price fixing by food retailers and their suppliers. Fines amounting to EUR 26 Mio have been imposed for those infringements in three industries: food retail, electronic devices and insulating material. Many proceedings are still pending. For the purpose of competition advocacy and prevention of future infringements the FCA has prepared a short paper clarifying the FCA's legal assessment of the practices involved. The paper was presented to the public on 13th June 2013. All interested parties are invited to comment by 1st August 2013.
The first part of the paper outlines by way of introduction the legal framework: Horizontal and vertical price fixing is qualified as hard core restriction under EU as well as national competition law. Vertical price fixing combined with horizontal coordination is addressed as special concern. Those practices can facilitate horizontal collusion of retailers. Only non binding recommendations of resale prices by suppliers are compatible with competition law. The standpoint then draws a list of conduct that is considered illegal by the FCA as well as a list of compatible conduct.
Illegal conduct (outline)
- Oral or written coordination or fixing of resale prices / minimum prices (for promotion) between retailers and suppliers.
- Agreement on bonuses, rebates and other incentives as remuneration for observance of agreed prices.
- Applying penalties, suspension of deliveries or other disadvantages for non observance of agreed prices.
- Penalties applied or the threatening with a reduction of purchase prices by a retailer to a supplier who fails to implement identical or similar resale prices when selling its products to other retailers.
- The retailer demands as condition for a raise of the purchase price that a particular resale price level is observed by other retailers.
- Agreements between supplier and retailer with the purpose to safeguard that the resale prices of other retailers keep within a particular frame or to safeguard a best price clause (preventing underpricing of a retailer's particular product by competing retailers) or a most favoured customer clause (aiming at uniform prices at wholesale and/or retail level).
- Participation of a retailer in the supervision of resale prices (price monitoring) by a supplier or vice versa: eg obligations or incentives for suppliers to communicate to retailers deviations from recommended/minimum prices by other retailers, obligations or incentives for retailers to communicate to suppliers deviations from recommended/minimum prices by other retailers;
- A supplier communicating to retailers in advance time and amount of resale price changes of other retailers.
- Agreements between suppliers and retailers on exclusive time frames for promotions or on coordination of the timing of promotional activities by different retailers.
Legal conduct (outline)
- Recommendation of resale prices to a retailer provided the recommendation is in fact and legally non binding.
- Promotional activities have to be organized autonomously by retailers. Information exchange with supplier is legal only to the extent that it is necessary for the planning of quantities.
- Independent, individual price monitoring is acceptable for retailers and suppliers on their respective markets.
- Suppliers are allowed to clarify towards retailers their marketing strategy when submitting non binding price recommendations, unless this supports directly or indirectly horizontal coordination of retailers.