On 13 December 2023, the Belgian Competition Authority (BCA) imposed a fine of almost EUR 500,000 on Le Creuset Benelux (Le Creuset) for restricting their distributors’ resale prices. The fine was issued following a settlement procedure, during which Le Creuset conceded to having implemented a vertical price fixing policy in its relations with distributors spanning 6.5 years.

Resale price maintenance under EU and Belgian competition rules

What is resale price maintenance?

Resale price maintenance (RPM) is the practice of a supplier imposing restrictions on their distributors’ pricing freedom. 

Resale price maintenance can take many forms and be imposed through direct or indirect means. Direct RPM often involves contractual arrangements that dictate the price distributors must charge their customers or that prohibit distributors from selling below a certain price level. Indirect RPM may involve incentives to adhere to, or disincentives to deviate from, a minimum price. Examples include fixing the resale margin or setting a maximum rebate level which a distributor is allowed to grant. Companies can also recommend a resale price or impose a maximum resale price. In such case, indirect RPM can also result from threats, intimidations or even penalties addressed to the distributor to encourage adherence to the supplier’s recommended or maximum price.

How are resale price restrictions dealt with under competition law?

Resale price restrictions are caught by the prohibition on anti-competitive agreements or practices[1] if they restrict competition by object or by effect.

Historically, national competition authorities often concluded that RPM constituted a by object restriction without carrying out any detailed assessment. However, the Court of Justice recently clarified in the Super Bock judgment that competition authorities cannot automatically presume that vertical agreements fixing minimum prices are by object restrictions of competition. Indeed, national authorities must ascertain that a vertical price fixing agreement presents a sufficient degree of harm to competition in light of the broader economic and legal context.[2]

Despite being caught under the prohibition on anti-competitive agreements, parties can sometimes benefit from an exemption.

First, if the conditions of the Vertical Block Exemption Regulation (VBER) are met,[3] suppliers can impose maximum and recommended resale prices, provided those prices do not amount to a fixed or minimum sale price as a result of pressure or incentives. Fixed or minimum resale prices are considered “hardcore restrictions”, which remove the benefit of the block exemption for the entire contract.

Second, if the VBER does not apply, e.g. because the market share thresholds are not met or the contract contains a hardcore restriction, the restriction can be exempted following an “individual assessment”. Such an individual assessment requires a detailed assessment of the economic impact of the restriction and requires parties to weigh the pro- and anti-competitive effects carefully.

In the absence of any sort of incentive or pressure, maximum and recommended resale prices are often considered to be neutral or beneficial for competition. Maximum resale prices can act as a ceiling on prices and prevent double marginalisation, while recommended resale prices leave distributors free to deviate from the suggested price. However, if the supplier has a strong market position, the chances increase that distributors will consistently adopt the recommended or maximum resale prices. This is because the distributors will have a significant economic incentive to adhere to the preferred resale price of the supplier. In this situation, it is less likely that the maximum or recommended resale prices will benefit from an individual exemption.

Fixed or minimum resale prices are viewed more critically and are usually seen as severely anti-competitive. For example, where fixed or minimum resale prices prevent the introduction or expansion of new, innovative distribution formats, or facilitates collusion between suppliers or buyers, authorities will typically consider this behaviour to amount to a by object restriction. 

In highly exceptional circumstances, fixed or minimum resale prices can however also generate efficiencies, e.g., when it is intended to prevent a particular distributor from using the supplier’s product as a loss leader to the detriment of the supplier’s brand or in the context of a short-term low price campaign implemented across a franchisee network.

Le Creuset’s behaviour

The BCA fined Le Creuset for pressuring its distributors to comply with the recommended retail prices. The company monitored adherence to its pricing policy and contacted distributors when they deviated from the recommended resale prices. Le Creuset also tracked its distributors' promotional activities and shared information regarding their competitors.

Conclusion

This decision marks the first time since the Caudalie saga that the BCA fines an undertaking for RPM. The fine demonstrates that RPM continues to be an enforcement priority for the authority.

See the following link for the press release. The full decision has not yet been published.

For more information, please contact Baptist Vleeshouwers or Jonathan Sake.

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[1] Article 101(1) TFEU and Article IV.1, §1, of the Belgian Code on Economic Law.

[2] Dutch courts recently applied the Super Bock case law to the ACM’s first ever RPM case (here).

[3] The VBER notably requires that neither the supplier nor distributor has a market share exceeding 30 %.