Antitrust issues in vertical relationships are no longer below the competition authorities’ ‘radar’. This trend of not only focusing on horizontal but also on vertical competition law infringements has once more been seen with the Belgian Competition Authority’s decision to fine Le Creuset EUR 490,112 for having implemented a resale price maintenance policy with its distributors over a six and half year period.
RPM as an infringement by object
Le Creuset Benelux (“Le Creuset”) is a company specialising in premium kitchen and wine accessories in Belgium and Luxembourg, selling directly to customers via its own physical and online shops, and also through a network of distributors.
The Belgian Competition Authority’s (“BCA”) investigation, which started in March 2017, found that between 2009 and 2016, when providing the new wholesale prices to its distributors each year, Le Creuset also communicated to its distributors recommended resale prices and recommended promotional resale prices. While those resale prices were designated as “recommended”, the BCA found evidence that in reality Le Creuset expected its distributors to strictly apply those prices and to apply the promotional prices within a fixed period. When Le Creuset introduced a selective distribution system in 2013, one of the mandatory criteria was specifically to respect Le Creuset’s pricing policy. Moreover, Le Creuset monitored the resale prices applied by its distributors and adopted ‘pressure’ tactics and penalties for non-compliance. For example, through e-mails, calls and visits, Le Creuset regularly reminded its distributors of the importance of respecting Le Creuset’s pricing policy. Le Creuset monitored its distributors’ prices by: checking their internet sites, visiting their physical shops, mystery shopping, and discussing retailers’ prices with competing retailers. Le Creuset also informed retailers of the fact that other retailers were already applying compliant prices and promotions. If there was non-compliance, then Le Creuset suspended orders, blocked deliveries, refused promotions, ended or did not renew the selective distribution contract, or suspended a retailer’s premium distributor status.
The Belgian Competition College found that Le Creuset’s pricing policy in fact amounted to the imposition of minimum resale prices. This vertical restriction of the freedom of Le Creuset’s distributors to independently set their own resale prices (also called “resale price maintenance”) constitutes a restriction of competition by object, which is prohibited by Article 101 § 1 of the Treaty on the Functioning of the European Union (“TFEU”) and Article IV.1 §1 of the Belgian Code on Economic Law (“BCEL”). For this severe competition law infringement, the College imposed a fine on Le Creuset of EUR 490.112.
Some takeaway points
The EUR 490.112 fine was set taking into account the statutory maximum fine of 10% of the infringer’s annual group turnover. In this case, that maximum was still calculated on Le Creuset’s annual Belgian turnover (as was provided in the law at the time of Le Creuset’s infringement). However, companies should be aware that the Belgian Code on Economic law was amended on this point in 2019. Consequently, the BCA can penalise restrictive practices committed since then with fines up to 10% of a company’s annual worldwide group turnover – even if those practices were, for example, limited to Belgium. The significant increase of the maximum amount of the fine was introduced to strengthen its deterrent effect.
One aspect to note is that the College stressed the distributors’ participation in the resale price maintenance scheme. The decision explains that through their behaviour, the distributors contributed to, and at the very least acquiesced in, Le Creuset’s policy of minimum resale prices. In fact, they applied prices in line with this policy, monitored the prices charged by their competitors, and when they found that prices were not in line with Le Creuset’s policy, they complained to Le Creuset and asked Le Creuset to intervene. At Le Creuset’s request, the distributors agreed to modify their prices and provided information on their current and/or future prices. Finally, the distributors agreed to Le Creuset’s intervention in the organisation of promotions. It was important for the College to find an agreement on the resale price maintenance scheme between Le Creuset and its distributors. Mere unilateral behaviour by Le Creuset could only have been penalised under Article 102 TFEU or Article IV.2 BCEL (the prohibition on abuse of dominance) but only to the extent that the College could prove Le Creuset was dominant. By stressing the distributors’ participation, the College could qualify Le Creuset’s pricing policy as a vertical restrictive agreement falling under the prohibition of Article 101 TFEU and Article IV.1 BCEL. Despite the distributors’ active role in the scheme, the College however did not go that far to impose a fine also on the distributors for their cooperation.
Finally, it is interesting to note that this is not the first time that the BCA has imposed a fine for resale price maintenance. In January 2023, Caudalie, the cosmetics company, was fined for imposing sales restrictions and applying a resale price maintenance scheme (see here, here and here for our blog posts on the Caudalie case). The fine imposed on Le Creuset should serve as a reminder and a warning to companies that the competition authorities, including the BCA, are no longer disregarding vertical practices.
For further questions, contact Carmen Verdonck and/or Beatrijs Gielen.