Clarifying Competition Law:
EU Distribution Agreements and Product Pricing:
Part 2
Robert Bell
Eckart Budelmann
Alexandra Rose
Luigi Zumbo
Speakers
Robert Bell
Partner, London
Robert.bell@bryancave.com
Tel: +44 20 3207 1232
Robert Bell is head of the EU & UK competition team at Bryan Cave with over 20 years of experience
advising on complex competition and regulatory matters involving some of the leading cases before The
Office of Fair Trading (OFT), the European Commission and UK and European Courts.
He advises clients on a range of competition law issues including merger control, cartels, restrictive
practices, competition litigation and public procurement law.
Mr. Bell has a particular sector specialism in advising international technology and media clients on
the application of competition law and new media, telecommunications regulation, and on competition
litigation.
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Speakers
Eckart Budelmann
Managing Partner of the Hamburg office
Eckart.budelmann@byancave.com
Tel: +99 40 30 33 16 125
Eckart Budelmann’s practice focuses on domestic and international mergers and acquisitions, anti trust,
bank and finance as well as general corporate matters with particular emphasis on private and public
investments, joint venture agreements, privatizations, insolvency and corporate restructuring.
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Speakers
Alexandra Rose
Associate, Hamburg
Alexandra.rose@bryancave.com
Tel: +49 40 30 33 16 132
Alexandra Rose advises clients on mergers and acquisitions (M&A), corporate law, banking and
finance, insolvency and corporate restructuring. A particular focus of her work lies in regulated
markets, competition law and procurement law.
Ms. Rose is a member of the Bryan Cave China Practice and works in close cooperation with the
Shanghai office to represent clients in Chinese-German cross-border transactions.
Speakers
Luigi Zumbo
Partner, SILS Milan (Affiliated firm)
Luigi.zumbo@bryancave.com
Tel: +39 / 02 / 7628-1370
Mr. Zumbo’s relationship with Bryan Cave LLP began in 1995; in 2011 he co-founded the Italian
partnership SILS, in affiliation with Bryan Cave and its international network.
His practice focuses on international corporate and competition law, mergers and acquisitions,
contracts and commercial litigation, including domestic and international arbitration, bankruptcy and
restructuring of distressed companies, in particular with respect to the energy sector and the automotive,
pharmaceutical, and fashion industries.
Mr. Zumbo has often been speaker at seminars and conferences on, among others, international trade,
antitrust issues, and distribution arrangements.
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Agenda
1. The Basics
2. Resale pricing
3. Most favoured nation clauses
4. Internet selling
5. Online market places
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The Basics
EU competition law
• Article 101(1): Prohibition on restrictive agreements
• Applicable to competitors (horizontal agreements) or suppliers/distributors (vertical agreements)
• Any prohibited agreements will be automatically void
• Article 101(3): Individual exemption
• Must, to be granted, contribute to improving production or distribution or promoting technical or economic progress
while allowing consumers a fair share of the benefit
• Commission Regulation No 330/2010 – The Vertical Agreements Block Exemption
• Valid through May 31, 2022
• The Block Exemption legislation will only apply if both parties have less than a 30% market share of their relevant
market or markets in the EU (or national markets if more applicable) and there must be no “hard-core” restrictions
present.
Domestic competition law
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•
EU Member States mirror the EU rules in their own domestic competition acts e.g. the UK Competition Act 1998
•
Each of the Member State’s competition authority is responsible for the application of the EU and domestic rules in
each state. It is a decentralised system of enforcement though the ECJ in Luxembourg is the final court of appeal.
Dangers of non-compliance
•
Agreements found invalid
•
Regulatory fines
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Private and collective damages actions
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Bad publicity
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UK Competition Law
• Competition Act 1998
– Chapter I: Prohibition on restrictive agreements
– Chapter II: Prohibition on abuse of a dominant position
– which have an appreciable effect on trade within UK
• Competition law is enforced in the UK by the Competition and Markets
Authority (CMA).
• Competition litigation cases are heard either in the High Court or the
Competition Appeals Tribunal (CAT).
•
Enterprise Act 2002 /Market Investigations
German Competition Law
• Act Against Restraints of Competition (Gesetz gegen
Wettbewerbsbeschränkungen – GWB) as amended on 21 July 2014
– Part 1, Chapter I: Prohibition of restraints on competition
– Part 1, Chapter II: Prohibition of abuse of a dominant position and
restrictive practices
– which have an significant effect in Germany
• Competition law is enforced in Germany by the German Federal Cartel
Office (Bundeskartellamt)
• Competition litigation cases are heard in the District Courts (Landgerichte);
Appeal can be filed at special cartel divisions of the Higher Regional Courts
(Oberlandesgerichte) and the German Federal Court (BGH)
• German particularity: Protection of small or medium-sized undertakings
Italian Competition Law
• Law No. 287 of 1990 and its amendments
– Article 2 prohibits anti-competitive agreements
between undertakings
– Article 3 forbids undertakings from abusing their
dominant position
– Italian Competition Law shall only apply if the anticompetitive conduct has appreciable effects only
on the Italian market
• Law No. 287 of 1990 is enforced by the Italian
Competition Authority (in Italian “AGCM”) and by the
Business Specialized Courts.
Resale Pricing
Resale Pricing - UK
In the UK:
- General Position : Offences under Chapter 1 of the Competition Act 1998 can take many different creative forms
from resale price maintenance to price relationship agreements, information exchange and hub and spoke cartels
- Status of Recommended prices
- Recent Cases.
•
Argos/Hasbro/Littlewoods (2003)
Argos and Littlewoods were fined by the then OFT in 2003 for each agreeing with Hasbro toys to fix the price of
Hasbro toys sold in the shops. Argos and Littlewoods were fined a total of over £22m.
•
JJB Sports/All Sports (2003)
Court of Appeal held A-B-C hub and spoke cartels. A must intend B makes use of that information and C must use the
info for future pricing intentions
• Tobacco Case (2010) OFT Decision
Price relationship agreements - Manufacturers had individual arrangements with each retailer whereby retail price of a
tobacco brand was linked to that of a competing brand. Partially overturned on appeal due to procedural reasons.
Certain parties which did not appeal were fined for their conduct
Resale Pricing - Germany
• Resale price maintenance is subject to sec. 1 GWB
• Covers not just prices, but also calculation schemes and rebates, e.g.
 Agreement on maximum rebates
 Agreements on maximum margins or a neutrality of margins
 Communication of minimum prices or fixed prices in order forms if
retailer uses forms without modification
•
Recent Cases:

2012: electronic tool manufacturer TTS Tooltechnic for threating with
disadvantages if retailers do not adhere to recommended resale prices (fined €
8.2m)

2013: producer of cosmetics Wala Heilmittel for making admission to selective
distribution system dependent on adherence to recommended resale prices
(fined 6.5m)

2013: Gardena and Bosch Siemens Hausgeräte ordered to terminate their
rebate systems which contained incentives to limit online sales
Resale Pricing - Italy
• Article 2(a) of Law No. 287 of 1990 sanctions all the forms of resale price maintenance practises
which may cause price agreements. The attention on the matter of the Italian Competition Authority
(the “ICA”) has been increasing over the last three years.
• On 22nd October 2013, the ICA investigated the company Power-One Italy S.p.A. as the latter sent a
communication to its distribution chain headed “Minimum selling price” in which the Vice-President of
Power-One reminded all its distributors, resellers and partners that they were under an obligation to
apply the minimum reselling price provided for by the Power-One’s price lists.
• Further, on 20th November 2013, the ICA opened an in-depth investigation on Enervit S.p.A. for
alleged Resale Price Maintenance. In such respect, the ICA focused its assessment on the following
alleged anti-competitive practices: a) the distribution agreement entered by Enervit S.p.A. and its
distributors which provided for resale pricing with reference to the products bearing the trademark
“Enerzona”; b) the Enervit S.p.A.’s recommendation towards all its online resellers not to apply a
discount percentage higher than the one suggested by Enervit S.p.A. to all the Internet sales .
MFN anMd resale pricing
MFN - UK
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•
•
•
•
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Sometimes known as ‘price parity’ or ‘best price’ clauses.
One party promises another to always offer its best rates or terms for a
product or service.
Whilst on the face of it these clauses seem favourable to consumers,
regulators are beginning to take the opposite view.
The current EU competition law position is that MFN clauses will infringe
Article 101(1) if in the individual circumstances of the case they result in an
appreciable adversely effect on competition in the European Union.
Restrictions by effect rather than object
MFN - UK
The Online Travel Agents Case
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In February 2014, the OFT accepted formal commitments from two of the UK’s largest online travel agents,
Booking.com B.V. (Booking.com) and Expedia Inc (Expedia), together with InterContinental Hotels Group plc (IHG).
The OFT’s concern was that that Booking.com and Expedia each entered into separate agreements with IHG which
restricted each their ability to discount the rates at which room-only hotel accommodation bookings are offered.
The investigation was launched by the OFT following a complaint by a small rival on-line travel agent which alleged
that the inability of online agents to offer discounts stifled price competition on the market and acted as a barrier to
new entrants or to the expansion of smaller agents already present in the market in favour of larger on line
competitors.
OFT case based on RPM/Agency rather than MFNs
In September 2014 the Competition Appeals Tribunal (CAT) struck down the package of commitments agreed
between parties and the OFT/CMAfollowing an appeal by Skyscanner. Skyscanner successfully pleaded that they
had not been party to the commitments and yet the commitments made by the other parties would have an effect on
their business.
On 28 October 2014, the CMA announced that it had re-opened its investigation into online hotel bookings.
MFN - UK
UK private motor insurance industry
•
In the CMA's report last year into the competitiveness of
the industry, the CMA had concerns over the use of MFN
clauses in the industry.
•
Under these MFA clauses, the insurers agree that they
will provide their best price to the comparison site and
that this price will be lower than anywhere else.
The CMA considered that:
• Effect in practice is for this fixed price to become
a minimum and exclusive price granted to one
website.
•
Lowers the likelihood of consumers searching for
deals, and in doing so precludes competition
between other comparison website and insurers.
•
The CMA’s proposed remedial measure is to
prohibit all MFN clauses and measures of
equivalent effect, unless if ‘narrow’ (that is, if they
only refer to a price cheaper than on a particular
insurer’s own website).
MFN - UK
• Use of On-line platforms forcing a rethink of MFNs
• Market power and network effect combined
• Application of VABE to MFNs uncertain –lack of legal certainty
• MFNs restrictions by effect not object so regulators have to prove anticompetitive effects
•
Case by case analysis essential –a real concern principally when the
imposing parties have market power (30% +)
MFN - Germany
HRS
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The German Federal Cartel Office prohibited leading
German hotel portal company HRS from applying a MFN
clause which required HRS’s hotel partners to offer their
lowest rates to HRS’s booking website. It also pursues
proceedings against Booking.com and Expedia.
The Cartel Office believed MFN clauses created barriers to
entry and prevented price competition.
Given the fact that HRS had a market share of more than
30%, the effects of the MFN clause in question were
particularly pronounced.
In January 2015, the Düsseldorf Higher Regional Court
rejected HRS’ appeal against the Cartel Office decision and
confirmed that HRS’ s MFN clause restricts competition to
such a degree that it cannot be exempted.
HRS can appeal the decision on points of law to the
German Federal Court of Justice (BGH).
MFN - Italy
The Expedia-Booking.com saga continues in Italy
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On 19th May 2014, the Italian Competition Authority (the “ICA”), following other European counterparts,
opened an in-depth investigation on the online travel agencies, Booking.com B.V. (“Booking”) and Expedia
Inc (“Expedia”) along with their Italian subsidiaries Booking.com S.r.l. and Expedia Italy S.r.l.
The ICA held that Booking and Expedia had agreed to certain contractual provisions (called “Most Favoured
Nation Clauses”) by which their hotels partner cannot offer better prices or conditions to others and smaller
online travel agencies. Further, Booking and Expedia were found able to monitor the respect of these
provisions through their website offer comparators (“Trivago” and “Kayak”).
In light of the above, the ICA expressed concern about the likelihood that Most Favoured Nation Clauses
may impede hotels to apply lower prices directly to the consumers and be a serious obstacle to overcome for
new online travel agencies willing to enter the relevant market.
Moreover, the ICA considered as aggravating circumstances that the online booking has been rapidly
increasing and that Booking and Expedia enjoy already a dominant position on the market.
Internet Selling
Internet Selling - UK
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A hardcore offence to ban internet sales. – Pierre Fabre DermoCosmetique Case C-439/09
Offences of automatic routing and banning a sale on the basis of
a credit card address (within the EU)
Advertising restrictions
What standards can you impose?
•
Requirement of a bricks and mortar shop
•
Quality standards
Mobility Scooters (2013) The OFT held in its decision that the
parties had entered into a series of agreements or engaged in
concerted practices over several periods between 2011 and 2012
which prevent UK-wide online retailers from selling Roma
branded mobility scooters online or from advertising their prices
online.
Internet Selling - Germany
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In 2011, the German Federal Cartel Office
forced German brass ware manufacturer
Dornbracht to adapt its trade agreement with
wholesalers because a rebate was only granted
for goods sold in a brick-and-mortar shop, but
not to internet sellers.
Such extra discount was found discriminatory to
internet sellers (dual pricing). A higher level of
customer service by brick-and-mortar shops was
no sufficient justification for the discrimination
towards online sellers .
Private Litigation Case: In 2013, the Higher
Regional Court of Düsseldorf ordered
Dornbracht to pay €820,00 to electronic retailer
Reuter to recover the historical damage caused
by the discriminatory discounts between 2008
and 2011.
The court held a manager to be liable for the
payment of damages as well.
Internet Selling - Italy
• Banning internet selling is considered a hard core restriction of competition also in Italy.
• In this regard, a peculiar case is the one about the Italian National Bar Council (the “NBC”), which represents and
coordinates all Italian professional orders of lawyers. On 14th November 2014, the Italian Competition Authority (“ICA”)
imposed a € 912,536.40 fine on the NBC for anti-competitive agreements.
• The subject of the ICA’s investigation was in particular an act adopted by the NBC under the lawyers’ Code of Ethics
which would have anti-competitive effects on the economic behaviour of the professionals: The Opinion No. 48/2012
(the “Opinion”).
• The Opinion would introduce a restriction of competition among lawyers by impeding them to use certain digital
platforms (i.e. through their web sites) to offer their legal services to the general public.
• In light of that, the ICA held that the two NBC’s acts have the restriction of competition among Italian lawyers as their
object so that according the Expedia case (C-226/11) and the new De Minimis Notice (2014) no further exam on the
negative economic effects were needed.
Online market places
Online Market Places - UK
• Established commercial position was that under paragraph 54 of the Guidelines on Vertical
Restraints 2010:
• “A supplier may require that its distributors use third party platforms to distribute the contract
products only in accordance with the standards and conditions agreed between the supplier
and its distributors for the distributors' use of the internet. For instance, where the
distributor's website is hosted by a third party platform, the supplier may require that
customers do not visit the distributor's website through a site carrying the name or logo of the
third party platform.”
• The leeway in the above statement was interpreted to mean Ebay and other marketplaces could
be banned if they did not meet the supplier’s standards.
• Frequent clauses in distribution agreements where supplier’s ban distributors selling on eBay and
Amazon Marketplace
•
Are cases from Germany about to break this established norm?
Online Market Places - Germany
adidas AG
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adidas AG is one of the world’s leading manufacturers
for sports wear and leisure articles and distributes its
articles by way of a selective distribution system
In 2012, adidas AG introduced new conditions for online
sales that included a prohibition for retailers to sell via
large online market places such as eBay and amazon.
The German FCO had initiated proceedings after it had
received numerous complaints by sports retailers
following the introduction of the new sales policy.
More than 3000 retailers and 90 competitors were being
interviewed.
German FCO confirms general legitimacy of selected
distribution systems if certain criteria are met, measures
taken by adidas AG did not meet these criteria by
introducing an online distribution ban per se
Online Market Places - Germany
Adidas AG
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adidas AG submitted an amended version of its
conditions of sale for e-commerce, in which it has
completely abandoned its ban on sales via online
market places.
The German FCO reasoning was not tested before the
Courts as the case was settled.
Trend to declare provisions banning internet
disctribution null and void (Sennheiser, Casio)
Online Market Places - Germany
Casio – Stand-alone private enforcement
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In 2014, The Schleswig Higher Regional Court ruled that Casio,
a large manufacturer of digital cameras, cannot ban its retailers
from selling via online market places such as Amazon and
Ebay.
Casio’s distribution system did not qualify as a selective
distribution system. Casio nevertheless argued that the ban on
online market places was necessary because no sufficient
specialised advice for digital cameras was possible via online
market places.
• The court argued that experience showed that larger retailers
such as Media Markt, Saturn, Karstadt or Medimax, which offer
a large range of products, could generally not be assumed to
offer more specialized advice for cameras than Amazon and
Ebay.
• The case is also of particular interest because it was not
preceded by any decision of the German FCO.
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Online Market Places - Italy
• The Italian Competition Authority (the “ICA”) has of course based its action
on the provision set forth under paragraph 54 of the Guidelines on Vertical
Restraints 2010 quoted above.
• In light of the above, it seems reasonable to state that the ICA would
sanction contractual clauses, subscribed between a supplier and a
distributor, impeding the latter to sell the products on online marketplaces
unless the prohibition is aimed at fighting counterfeiting.
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eu-competitionlaw.com
Competition Investigations in Europe
Competition investigations in:• EU
• United Kingdom
• France
• Germany;&
• Italy
CPD Points
CPD points are available for this webinar.
CPD points may be collected by emailing: europe.marketing@bryancave.com
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