RESALE PRICE MAINTENANCE – Need to assess the harmfulness of a resale price maintenance practice in order to establish a restriction by object

ECJ, June 29, 2023, Case C-211/22

In a ruling on June 29, 2023, the European Court of Justice (ECJ) confirms that the mere fact that a vertical agreement fixing minimum resale prices is likely to fall into the category of “hardcore restrictions” within the meaning of Regulation no. 330/2010 on vertical restraints does not dispense with the need to verify whether it presents a sufficient degree of harmfulness to competition, in order to qualify it as a “restriction of competition by object” within the meaning of Article 101 par. 1 of the Treaty on the Functioning of the European Union.

Super Bock is a Portuguese beverage producer. In order to distribute its products to hotels, restaurants and cafés, the company has entered into distribution contracts with independent distributors. In 2019, the Portuguese Competition Authority fined Super Bock 24 million euros for imposing fixed or minimum prices on its distributors. Specifically, Super Bock provided its distributors with lists of minimum resale prices and distribution margins, either verbally or in writing. Distributors generally applied prices accordingly and provided Super Bock with data relating to the resale of Super Bock’s beverages, in terms of quantity and amount. Whenever distributors deviated from the communicated prices, retaliatory measures were implemented, such as the removal of financial incentives (discounts) or in terms of stock procurement and replenishment. Following an appeal, the Lisbon Court of Appeal submitted a set of questions to the ECJ, including (i) whether the agreement constituted a restriction of competition by object, and (ii) whether it constituted an agreement within the meaning of Article 101 par.1 of the Treaty on the Functioning of the European Union (TFEU). The ECJ’s answers on these two points are the main highlights of the judgment under review.

(i) Qualification as a restriction of competition by object

The main interest of the Super Bock ruling lies in the classification as a restriction of competition by object of a vertical agreement fixing resale prices, which is a hardcore restriction of competition under Regulation n°330/2010 on vertical agreements (the Regulation), applicable in this case in the presence of a distribution contract between a supplier and its distributors. 

As a reminder, Article 101 par.1 of the TFEU prohibits agreements which have as their “object or effect” the restriction of competition. Restrictions by object are those which, by their very nature, have the capacity to restrict competition, so that it is not necessary to examine their effects. To maintain these agreements , it will therefore be necessary to prove that they can be exempted, either by means of an individual exemption (Article 101 par. 3 TFEU), or by means of an exemption regulation. Article 4 a) of the Regulation stipulates that the fixing of minimum resale prices constitutes a hardcore restriction of competition, so that the benefit of the exemption for an agreement containing such a restriction is lost.

In this case, the ECJ points out that the concept of restriction of competition by object must be interpreted restrictively. The ECJ then provides an analytical grid, indicating that to qualify a restriction as a restriction by object, it is necessary to focus on the content of its provisions, the objectives to be achieved, and the economic and legal context in which the agreement operates.

More specifically, on the subject of resale price maintenance – and this is the main point of interest of this ruling – the ECJ emphasizes that, although the Regulation withdraws the exemption for agreements involving resale price maintenance or minimum price maintenance, it does not provide that this hardcore restriction constitutes a restriction of competition by object. Consequently, the courts or authorities must carry out the analysis described above to qualify the agreement as a restriction of competition by object, even in the presence of a hardcore restriction. However, it should be stressed, that the Court indicates that the presence of a hardcore restriction may be considered in the legal context as part of the analysis grid described above.

In other words, the presence of a hardcore restriction does not absolve the authorities from assessing the harmfulness of the agreement in the light of the factors described above.

(ii) Qualification as an “agreement”

Secondly, the ECJ also clarifies the concept of “agreement” within the meaning of Article 101 par.1 TFEU, which prohibits “agreements” which have the object or effect of restricting competition.
The ECJ reiterates the Court’s consistent case-law that an agreement exists when companies have expressed their joint intention to behave on the market in a particular way. This agreement may result from clauses in distribution contracts, but also from the behaviour of the parties, in particular the acceptance by  distributors to comply with  resale prices as set by suppliers.

A unilateral pricing policy cannot constitute an agreement under Article 101 par.1 TFEU. For example, sending out minimum price lists and setting up a price police with a system of reprisals do not necessarily mean that there is an anticompetitive agreement, and may be the result of purely unilateral behaviour on the part of the supplier. 

On the other hand, the ECJ states that when this apparently unilateral behaviour on the part of the supplier is accompanied by compliance with prices by distributors, or when their determination is sought by distributors which, while complaining to the supplier about the prices indicated, do not set other prices, then there could be acceptance on the part of distributors and therefore an agreement within the meaning of Article 101 par.1 TFEU.

Lastly,  the ECJ also ruled (i) on the subject of proof of a competitive agreement, confirming that proof of such an agreement can be provided by means of direct evidence or by means of a body of evidence, and (ii) on the concept of affecting trade between Member States, confirming that trade between Member States can be affected even when the agreement under review does not cover the entire territory of a Member State, but concerns almost all of it.