EU Court of Justice provides guidance on resale price maintenance under EU competition law – the judgement in Super Bock

The fact that the European Commission (EC) classified resale price maintenance as a hardcore restriction under its Vertical Block Exemption Regulation does not mean that it automatically violates EU competition law as a "by object"restriction pursuant to Article 101(1) TFEU. To that end, competition authorities must demonstrate that a vertical price fixing agreement presents a sufficient degree of harm to competition taking into account the economic and legal context which it forms part of.

Background

Resale Price Maintenance (RPM) remains classified as a hardcore restriction under the recently revised Vertical Block Exemption Regulation (VBER), meaning that the RPM cannot benefit from a statutory exemption from Article 101(1) TFEU that is otherwise available   for certain types of vertical agreements. But does that mean it violates, in and of itself, Article 101(1) TFEU?

Super Bock Bebidas is a leading Portuguese beverage manufacturer and marketer of non-alcoholic and alcoholic drinks. In 2019, the Portuguese competition authority fined the company EUR 24 million for imposing on its distributors either specific fixed or minimum prices to be charged to their customers in hotels, restaurants and bars. In practice, distributors charged the imposed prices even though they complained about them. Super Bock was monitoring whether distributors comply with those prices. In case of non-compliance, Super Bock could retaliate by, amongst others, removing various trade discounts or refusing to supply products. In order to avoid the retaliatory measures, distributors themselves often asked Super Bock about the resale prices they should charge.

Super Bock appealed the decision, essentially arguing that the competition authority failed to demonstrate (i) the existence of an agreement and (ii) that the conduct in question was sufficiently harmful. The company wants the imposed fined cancelled or at least reduced.

In March 2022, the Lisbon Court of Appeal referred questions for Court of Justice of the European Union (CJEU) preliminary¹ ruling asking for guidance, which can be summarised in the three following points::

1. Whether a vertical agreement fixing minimum resale prices can constitute a restriction of competition by "object";
2. Clarification on the concept of an "agreement" within the meaning of Article 101 (1) TFEU in the context of Super Bock imposing minimum resale prices on its distributors; and
3. Whether the concept of "effect on trade between Member States" includes the consequences of a distribution agreement that affects almost the entirety of the territory of a single Member State.

Summary of the judgement

On the first point, the CJEU reaffirms that vertical RPM agreements are under certain conditions capable of restricting competition by "object", meaning that a competition authority can regard the practice as per se infringement of competition law without the need to prove adverse effects on competition in a market. However, the CJEU recalls that the concept of a "by object" restriction must be interpreted narrowly. In particular, it needs to be analysed whether such agreement presents a sufficient degree of harm to competition taking into account the agreement’s objectives, economic and legal context. Additionally, the CJEU clarified that whilst the concept of "hardcore restrictions" set out in the VBER and the concept of restriction of competition "by object" are not interchangeable and do not overlap, the fact that the RPM is classified as a hardcore restriction can and should be taken into account when analysing the legal context of which the agreement forms part of.

On the second point, the CJEU notes that the following factors are relevant for concluding that Super Bock imposed prices on its distributors: (i) asking distributors to comply with the minimum resale prices that Super Bock regularly communicates either by emails or orally and (ii) the supplier’s ability to impose retaliatory measures in case of the non-compliance. However, the CJEU recalls that for an agreement to exist between Super Bock and the distributors, there must be "concurrence of wills" regardless of forms in which such concurrence is expressed. That concurrence of wills can be demonstrated from the terms of the distribution contract and from explicit or tacit acceptance with the minimum resale prices imposed by Super Bock. The CJEU noted that the fact that distributors followed the prices or even inquired about them, despite complaining about them, indicates that the element of distributors’ "acquiescence" was present. The final assessment, however, remains on the referring national courts taking into account facts of the case. As to the proof of the existence of the agreement as such, this can be established based on direct evidence or indirect evidence, including "objective and consistent indicia", where it may be inferred that Super Bock invited the distributors to apply the minimum resale prices and that the distributors complied with the prices.

Finally, the CJEU reiterates that in order for an agreement to fall under Article 101 TFEU, such agreement needs to affect trade between Member States. In that regard, it recalls established case law pursuant to which an agreement covering the territory of just one (or part of) Member State can still be capable of affecting trade between Member States. What matters is whether it can be demonstrated with "sufficient degree of probability" that the agreement may have substantial "direct or indirect, actual or potential influence" on trade between Member States to the detriment of a single market between Member States.

Practical takeaways

The judgement mostly restates case law on established EU competition law concepts. However, and importantly, it shows that the case law also applies to vertical price fixing agreements.

As such, the judgement is a helpful reminder that there is no such thing as a list of practices that are considered to automatically violate EU competition law. Similarly to the US federal law under which RPM is not per se unlawful but needs to be analysed under the "rule of reason",² Super Bock confirms that EU competition authorities must demonstrate that a certain conduct is sufficiently harmful to competition taking into account economic and legal context of which the agreement is part of. This is true also for practices classified as "hardcore restrictions" under the VBER, such as the RPM, a factor that a competition authority should take into account in its assessment. Practically speaking, given authorities’ general reluctance to accept vertical price fixing as legitimate, the fact that RPM is classified as a "hardcore restriction" may be contributing to the finding that RPM constitutes a restriction of competition "by object", which is still the norm in the EU and Member State precedents.

The main battleground will, however, continue to be whether a specific practice constitutes an RPM "agreement" in cases where the agreement is "neutral" in respect of RPM, but where an RPM agreement arises from subsequent conduct of the parties. The "concurrence of wills" regarding the RPM may result from a distributor’s acquiesces to a coercive measure of a supplier. It is unclear whether Super Bock’s ability to impose retaliatory measure would be enough to establish the element of "coercion" as the judgement does not elaborate on that aspect. Similarly on the "acquiescence", the judgement is a missed opportunity to provide more colour on the concept, which continues to be difficult to apply in practice as little court and EC guidance exist to date. In that regard, distributors are stuck between a rock and a hard place where a supplier asks the distributor to follow a specific price and the distributor, out of its own motion, decides it is in its unilateral best interest to do so.   Is that enough for acquiescence, or how do you prove a negative?   And how frequently would they have to deviate to demonstrate a lack of acquiescence? Such questions remain open..

_{1 Judgement C-211/22, Super Bock Bebidas SA, AN, BQ v Autoridade da Concorrencia, dated 23 June 2023.
2 Under the rule of reason, courts examine both the positive and negative effects of an agreement before determining whether it violates antitrust laws.}

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