Resale price restrictions: A new horizon under the new Vertical Block Exemption Regulation?

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Resale price maintenance are still prohibited under the New Block Exemption Regulation although the Guidelines introduce important new elements
Resale price restrictions: A new horizon under the new Vertical Block Exemption Regulation?
February 14, 2023

Article 101 of the Treaty on the Functioning of the European Union (TFEU) and article 1 of Law 15/2007, of July 3, on the Defense of Competition (LDC) prohibit any agreement or practice that restricts distributors’ ability to determine resale prices, either directly (by imposing minimum or fixed resale prices) or indirectly (by fixing resale margins or maximum discount levels).

Resale price maintenance (RPM) is one of the most sanctioned vertical restrictions by competition authorities in our environment, with 45 sanctioning resolutions since 2019. At the same time, keeping the consideration ofRPM as a hardcore restriction under Regulation 2022/720 (“New VBER”) has been one of the most debated aspects during the review of Regulation 330/2010—mainly due to the potential procompetitive effects of these practices.  

Despite the criticism, RPM is still legally considered a hardcore restriction under article 4(a) of the New VBER. This includes, in particular, imposing fixed or minimum prices. The New VBER continues to allow the imposition of maximum or recommended sale prices, provided that they are not combined with incentives (to apply the recommended price level), disincentives (to lower the sale price) or retaliation in response to deviations from that recommendation (e.g., threats of supply disruption or withdrawals of special commercial conditions).

Although the basic principles have not changed, the New VBER and the New Guidelines (2022/C 248/01) have introduced several new elements, as explained below.

  • Imposition of minimum advertised prices (MAPs).

Under the New VBER, the imposition of minimum advertised prices that restrict the distributors’ ability to inform potential customers about available discounts below a level set by the supplier is considered a is a hardcore restriction.

  • RPM and online intermediation services.

The exemption under the New VBER does not cover the imposition by online intermediation service providers of minimum or fixed sale prices for the transactions that they intermediate.

  • Price monitoring and price reporting.

The New Guidelines expressly allow price monitoring and price reporting, both through electronic tools (algorithms, price monitoring software) and “traditional” tools, provided that they are not combined with measures aimed at fixing the resale price.

  • Imposition of resale prices in fulfillment contracts

The New Guidelines clarify the regime applicable to the determination of prices in fulfillment contracts. On the one hand, the imposition of a resale price by the supplier on the undertaking fulfilling the contract previously entered into with the end user does not constitute RPM. On the contrary, if consumers do not waive their right to choose the undertaking that will provide the fulfilment services and actually designate it, the imposition of a resale price by the supplier will not be covered by the New VBER.

  • Dual pricing.

The New Guidelines expressly allow dual pricing— i.e., setting different prices based on the distributor/customer’s intention to resell the products or services online or offline. In this regard, the price difference cannot prevent online sales and must be related to the differences in investment levels and costs applicable to each sales channel.

  • RPM and agency agreements

Agreements where the agent does not bear any risk fall outside the scope of article 101(1) TFEU. Therefore, in this case, the principal can fix the resale price without this conduct constituing a restriction of competition. On the contrary, if agents bear some risk (e.g., the financing of stocks), they should be allowed to determine the effective price to be paid by the customer as in the case of distributors.

Agents may also act as independent distributors for a supplier in the same product market. In that event, it should be possible to effectively delineate the activities and risks covered by the agency agreement. The supplier may then impose resale prices for the products exclusively under the agency agreement, provided that it falls outside the scope of article 101(1) TFEU (i.e., “genuine” agency). In this regard, the independent distributor must be genuinely free to enter into the agency agreement, while the principal must bear all risks related to the sale of the goods or services covered by it, including market-specific investments.

  • Assessment of the efficiencies generated by RPM

Finally, the New Guidelines reiterates the three situations where it is possible to consider the potential efficiencies generated by this type of practice: (i) the launch of a new product; (ii) a coordinated short-term low-price campaign (of 2 to 6 weeks); and (iii) the promotion of after-sales services. The Guidelines also add a new case where the imposition of fixed or minimum resale prices may have procompetitive effects: to prevent the distributor from selling the product below cost as a loss leader.

February 14, 2023