The Polish Competition Authority (“PCA”) has recently opened a series of cases concerning resale price maintenance practices (“RPM”) in sales of electronic products.

Poland is no exception. EU competition authorities keep investigating RPM practices. This trend has not diminished, even after the recent Super Bock judgment by the Court of Justice of the European Union, which mandates an analysis based on by-object or by-effect criteria before deeming RPM illegal.

As discussed below, companies marketing electronics  should review their compliance policies and relations with distributors and suppliers. Regular antitrust trainings for procurement and sales departments are essential to avoid burdensome investigations and hefty fines.

Focus on electronics

Monitoring prices along the distribution chain is now easier than ever due to the continued growth in online sales.

Distributors can change their prices quickly and some can decide to request that suppliers have other distributors’ prices adjusted to the so-called market level. Such practices can often lead to illegal conduct.

This seems to be the case in recent investigations into the distribution networks of smartwatches, forestry and landscape maintenance equipment, coffee machines, CCTV monitoring equipment, and cleaning devices.

Distributors on the spot

In its earlier practice, the PCA was fining suppliers, although buyers were also involved in anticompetitive agreements. The PCA argued that sanctioning distributors is unfair because they are frequently forced to observe price discipline. Although this approach received some criticism for lacking a legal basis in national legislation, Polish courts have upheld it.

Now, many of the ongoing RPM probes are also conducted against distributors. The PCA has noted that, despite the strong position of suppliers or importers, large retail chains have significant purchasing power. Their involvement in vertical price fixing may extend beyond merely accepting the supplier’s terms passively. In fact, some of these arrangements could even qualify as hub-and-spoke collusion or horizontal inter-dealer cartels.

Additionally, involving more parties in antitrust proceedings can lead to higher fines.

Leniency in vertical set-ups

Poland is one of a few countries where it is possible to submit a leniency application concerning competition law infringements in vertical agreements. This is because participation in vertical price fixing activity is not always visible on the market and can lead to exposure to significant sanctions.

Hence, there can be “a leniency race” between the supplier and distributors or retail chains. Only a company that was first to file for leniency can possibly avoid fines imposed by the PCA.

However, considering the diverse interests of different parties in the distribution network, the PCA must carefully evaluate and consider the evidence provided by leniency applicants.

What safe harbours are available?

A certain degree of control over prices along the distribution chain is essential in the electronics industry as suppliers offer many products at different price points to attract a wide group of consumers.

Based on the new vertical block exemption regulation, there are certain strategies that companies can apply to minimise competition law risk.

• At the wholesale level, the electronics market often works according to a model where suppliers have ongoing direct contacts with retailers, operators, and wholesalers. Such a scenario is legal provided that a supplier agrees with a specific retailer on a price and afterwards, selects a third party to perform the supply agreement (a fulfilment model).
• At the retail level, price monitoring and reporting to suppliers do not constitute RPM.
• Promotions. The vertical guidelines provide an exemption for “short-term low-price campaigns” lasting from two to six weeks. This exemption is likely to apply in practice. Nonetheless, this exception should not be extended in time, for instance by requesting the supplier to provide additional sales support for the same product, once the promotion has ended.
• Recommended and maximum prices. The vertical guidelines accept price recommendations if they are not concealed fixed or minimum prices; this also applies to maximum resale prices which are block-exempted and thus lawful under EU and national competition law.

For more information or further guidance in this area, please contact Marcin Alberski and Szymon Gołębiowski.

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