Minimum price fixing scheme does not automatically constitute a restriction of competition "by object". 

In a decision handed down on June 29, 2023 (C211/22), the Court of Justice clarified the difference between the concepts of "restrictions by object" (practices which do not require an assessment of their anti-competitive effects, as they are considered harmful to the normal functioning of competition) and "hardcore restrictions" (vertical practices which withdraw the benefit of the exemptions provided for in European regulations 330/210 of April 20, 2010 and 2022/720 of May 10, 2022 on vertical agreements). As a result, if a price-fixing agreement loses the benefit of the block exemption, this does not mean that the agreement should be considered illegal per se.

The dispute in question pitted Super Bock Bebidas SA against the Portuguese Competition Authority.

Super Bock, a Portuguese company selling beer and bottled water, was condemned by the Portuguese Competition Authority for regularly setting and imposing commercial conditions on its distributors. Super Bock distributed lists of minimum resale prices, which were in practice followed by distributors, and had set up control mechanisms to ensure that distributors complied with the minimum resale prices. If they failed to do so, distributors were liable to "retaliatory measures" such as the withdrawal of trade discounts or refusal to replenish stocks.

Considering that these measures to fix (directly and indirectly) the resale prices of products by independent distributors contravened the provisions of Article 101(1) of the Treaty on the Functioning of the European Union (hereafter "TFEU") prohibiting anti-competitive agreements, the Portuguese Competition Authority imposed a fine on Super Bock. This decision was subsequently upheld by the Portuguese Court of Competition, Regulation and Supervision. 

The companies then appealed to the Lisbon Court of Appeal. In these circumstances, the Lisbon Court of Appeal, the referring court, sought clarification on the interpretation of Article 101 TFEU, and formulated a number of questions for a preliminary ruling, including the following: 

1. I the fixing of minimum prices by a supplier to its distributors in itself an infringement "by object" which does not require a prior assessment of whether the agreement is sufficiently harmful?
   
   
2. Is the agreement between suppliers and distributors to fix (vertically) minimum prices and other commercial conditions applicable to resale presumed to present a sufficient degree of harmfulness to competition, without prejudice to the assessment of any positive economic effects deriving from the said practice, pursuant to Article 101(3) TFEU?
   
   
3. Do (i) the sending of lists indicating minimum prices and distribution margins, (ii) the request for sales prices from distributors, (iii) the lodging of complaints by distributors - when they consider that the resale prices imposed on them are not competitive or when they observe that competing distributors do not adhere to them -, (iv) the existence of price-trackingmechanisms (as a minimum), and (v) retaliatory measures (without demonstration of their concrete application), constitute sufficient evidence of the commission of an infringement through the (tacit) fixing of minimum prices for distributors?

On the first two questions, it should be remembered that Article 4(a) of Regulation 330/2010 on vertical restraints of competition lists resale price fixing as one of the "hardcore restrictions". 

In this decision, however, the CJEU points out that Article 4(a) of Regulation No 330/2010 is only intended to exclude identified vertical restraints from the scope of the block exemption for vertical agreements, without the practices in question necessarily constituting restrictions "by object".

The CJEU points out that the concept of "restriction by object" must be interpreted restrictively, and only covers practices that have a sufficient degree of harmfulness to competition. 

The sufficient degree of harmfulness is therefore the "essential legal criterion" for determining whether or not an agreement involves a restriction of competition by object. 

In other words, although an imposed resale price practice is included in the list of hardcore restrictions under the aforementioned European regulation, it will only constitute a restriction of competition by object if it is shown to have a sufficient degree of harmfulness on competition. The notions of hardcore restriction and restriction by object are therefore not conceptually equivalent. 

Without making an analysis of the case in point, or determining a standard of proof, the CJEU invites the referring court to assess the degree of harmfulness of the agreement in question, in the light of its provisions, the objectives it seeks to achieve, and all the elements characterizing the legal and economic context surrounding it. The CJEU also specifies that, in assessing that context, the referring court must also take account of the nature of the goods or services affected and the actual conditions of operation and structure of the market or markets in question.

Furthermore, if the parties consider that the agreement has pro-competitive effects, these effects will have to be taken into account as an element of context, at the stage of the assessment of the harmfulness of the agreement, and therefore, as soon as it is qualified as a "restriction by object".

The CJEU further clarifies that the fact that the price-fixing agreement falls into the category of hardcore restrictions must be taken into account as an element of legal context. 

This clarification is welcome, given that in recent years, decision-making practice has tended to consider imposed prices as a restriction by object, without necessarily characterizing its degree of harmfulness, to the great displeasure of companies accused of implementing such practices. In principle, the authorities will no longer have to dispense with this assessment.

In addition, on the occasion of this dispute, the CJEU also ruled, under the third question above, on the elements to be taken into account to characterize a practice of imposed resale prices and therefore on the notion of "agreement".

Once again, the CJEU invites the referring court to assess the circumstances of the case, specifying that the agreement of will may result from "the terms of the distribution contract at issue, where it contains an express invitation to comply with minimum resale prices or authorises, at the very least, the supplier to impose those prices, as well as from the conduct of the parties and, in particular, from any explicit or tacit acquiescence on the part of the distributors to an invitation to comply with minimum resale prices".

With regard to the supplier's willingness, the CJEU states that this can be inferred from the fact that (i) it regularly sends distributors lists indicating the minimum prices he sets - not recommended prices - and the distribution margins, and (ii) it asks them to comply with them, "which it monitors, on pain of retaliatory measures and at the risk, in the event of non-compliance with those measures, of the application of negative distribution margins". It is clear, therefore, that mere monitoring would not be enough, contrary to the view sometimes taken by competition authorities.

As for the distributor's willingness, we understand that this can be inferred from the fact that minimum prices are in practice followed by distributors, or that their indication is requested by them. 

The agreement must therefore reflect the expression of the concordant will of these parties. The CJEU adds that the existence of an "agreement" between a supplier and its distributors can be established by direct evidence, but also by objective and concordant evidence.

For the second time, the European Commission examines a transaction that does not meet the merger control thresholds

On August 18, 2023, for the second time, the Commission accepted a referral request from the national competition authorities, as authorized by the Merger Control Regulation (Article 22), for a transaction that was below the thresholds for control by the competition authorities. For the record, this procedure was used for the first time in 2022, when Illumina acquired Grail (Dentons - Competition News - October 2022). Not only did the Commission prohibit this transaction, but it also imposed a fine of €432 million on Illumina for having carried out the transaction prior to its authorization. 

In this case, the French Competition Authority and fourteen (14) national competition authorities, both European and non-European, have requested the European Commission to examine a merger in the long- and short-range communications technologies sector. The two companies involved in the procedure are leaders in this fast-growing market. 

Although this transaction was not subject to notification, either to a national competition authority or to the European Commission, these authorities considered that this transaction could have significant effects on the market. Indeed, the target company is considered to be highly innovative and a pioneer in its field. Moreover, the competition authorities that have ruled on the case have taken the view that this transaction could have the effect of eliminating strong competitive pressure between the parties, and thus have a major impact on prices, as well as on innovation. 

This is yet another example of how competitively sensitive transactions can no longer always pass under the radar of European competition authorities. 

Electronic termination of contracts concluded online from June 1, 2023

The decree of May 31, 2023 on the technical terms and conditions for terminating contracts electronically, came into force on June 1, 2023. This decree sets out the terms and conditions designed to make online contract termination as simple as possible for consumers, without altering the general conditions of contract termination.

As a reminder, in order to reinforce consumer protection and facilitate the termination of contracts, French law No. 2022-1158 of August 16, 2022 on emergency measures to protect purchasing power introduced electronic termination of contracts concluded online. Article 15 of this law requires a professional who has concluded a contract with a consumer by electronic means to allow the consumer to cancel the contract online. In addition, a consumer who has not concluded a contract online must also be offered the possibility of terminating it online if the professional offers consumers the possibility of concluding a contract online at the desired termination date. These new rules apply to contracts in force on the date of entry into force of the aforementioned law.

In practice, professionals must set up a free cancellation function, directly and easily accessible via their platform. It must be presented under the heading “résilier votre contrat” (meaning “cancel your contract”) or using another unambiguous formula, and may include information on the conditions of cancellation (notice period, termination indemnity, etc.). The decree prohibits the professional from requiring the consumer to create a personalized space, if one has not already been created, in order to give notice of termination.

Once the consumer has checked his or her details, he/she can send notice of termination by clicking on “notification de la résiliation” (meaning "notice of termination") or a similar unambiguous wording displayed in legible characters. The professional will then confirm receipt of the notification and inform the consumer of the date on which the contract will come to an end, as well as the effects of the cancellation, on a durable medium and within a reasonable period of time.

Professionals need to be vigilant to ensure that these measures are effectively implemented, since failure to comply with these new provisions is punishable by a fine of up to €15,000 for an individual and €75,000 for a legal entity.

DGCCRF fines SHOWROOMPRIVE.COM €600,000 for misleading commercial practices on its online sales site

In its press release dated July 11, 2023, the Direction Générale de la Concurrence, de la Consommation et de la Répression des Fraudes ("DGCCRF") indicated that it had found that certain products sold by SHOWROOMPRIVE.COM were falsely promoted, insofar as "the price reduction announcements were based on misleading reference prices for items sold on its site".

The DGCCRF considered that these false promotions were likely to alter the consumer's judgment in his/her act of purchase, and constituted the offence of misleading commercial practices. As SHOWROOMPRIVE.COM did not contest the facts, the DGCCRF imposed a fine of €600,000, in accordance with Articles L.121-2 and L.121-3 of the French Consumer Code.