In its ruling from 6 November 2023, the Czech Supreme Administrative Court (“NSS”) confirmed a first instance court decision that annulled the decision of the Office for the Protection of Competition (“Office”) which imposed a heavy fine on Baby Direkt, s.r.o. (“Baby Direkt”) for resale price maintenance (“RPM”). The NSS clarified that a diligent approach is required in identifying the individual RPM agreements during the relevant period and evidencing concurrence of wills between their parties, if these are to be reflected in the sanction. Given the long-term hawkish approach of the Office in sanctioning RPM agreements, the NSS decision may signal a change in the wind for competitors. 

Court intervention annuls Office decision

Baby Direkt is a company specialising in the wholesale of baby and children related goods. After initial proceedings and appeal, the Office found that between 2011 and 2018, Baby Direkt entered into RPM agreements with its retail partners and followed up with repercussions if these were not adhered to. The Office concluded that the actions within this period constituted a continuing antitrust offence, for which Baby Direkt was fined almost CZK 41 million (approx. EUR 1.7 million).

Baby Direkt challenged the decision in court and achieved its annulment in a first instance ruling last year. After appeal by the Office, the NSS has now confirmed the annulment of the Office’s decision and returned the case for new assessment to the Office.

Sanctions must be justified by individualisation of agreements

The principal ground for annulment of the decision was that the Office failed to duly evidence the extent of Baby Direkt’s offence, resulting in the sanction handed out. The decision failed to individually identify and describe the prohibited agreements and the respective retail partners with whom they were concluded. The NSS held that the evidencing of only certain partial offences (RPM agreements) is insufficient to support the Office’s conclusion. 

In this respect the NSS notes (citing conclusions of the Court of Justice of the EU in the Super Bock case) that an “agreement” requires in particular the finding of a concurrence of wills. The Office must therefore investigate and describe in the decision the existence of a concurrence of wills to evidence each of the prohibited RPM agreements. The decision must concretely ascertain how many prohibited agreements the competitor is charged with concluding, as well as roughly in which time span and in what manner. Only then it is possible to assess the total extent and gravity of the offence and to deliver a proportionate sanction.

Challenging the Office’s approach to RPM sanctioning

As we reported previously (for example here), the Office is particularly focused on sanctioning RPM agreements and regularly investigates and sanctions such activity. The NSS decision is therefore likely to influence this trend. Moving forward, the Office will have to meet a more stringent standard in investigating and evidencing the existence of RPM agreements to justify its sanctions. 

It will be interesting to follow how the clarified principles are applied by the Office in its practice. 

The decision of the NSS is available here (in Czech only).

If you need more information or further guidance in this area, please contact Vojtěch Chloupek and Martin Taimr.

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