RIP RRP!

There has been a widespread clampdown on resale price maintenance (RPM) by competition authorities in the EU in recent years.

There has been a widespread clampdown on resale price maintenance (RPM) by competition authorities in the EU in recent years (e.g. dairy products in Austria, tools and cosmetics in Germany, motor vehicles in Spain).  However, alongside the increasing volume of cases, the concept of what amounts to unlawful RPM is also broadening in scope.

It is well established that agreeing fixed or minimum prices with third party resellers is unlawful (because it blunts intra-brand competition amongst resellers). Recommending resale prices is, on the other hand, generally accepted to be perfectly lawful.  Under the EU Vertical Agreements Block Exemption Regulation, RRPs are permitted unless underpinned by pressure or incentive tactics (considered to have the effect of turning a recommendation into a fix).

In Germany, the Federal Cartel Office (FCO) has issued guidance, setting out examples of pressures and incentives that will almost certainly tip lawful RRP into unlawful RPM:

Examples of pressures:

• Penalties

• Delisting

• Terminating or delaying contract

• Suspending or limiting deliveries 

Examples of incentives:

• Granting benefits or rebates

• Marketing support in exchange for special price offers by distributor

• Refunds

However, the FCO also specified a number of practices which, individually do not necessarily infringe the prohibition on RPM, but could do so, depending on the particular circumstances of the case.  These include:

• re-addressing recommended resale prices with resellers during follow-up contacts, such that it goes beyond explaining the original recommendation

• systematic price monitoring in co-operation with resellers

• compilation of price comparison lists in order to disclose them to other resellers

• providing calculation or pricing manuals or guidelines to resellers 

• imprinting or labelling recommended prices on products or shop display materials without clearly stating that they are recommendations.

The focus on RRPs (as RPM) by EU antitrust authorities is likely to continue.  And the German approach will almost certainly be reflected in other EU Member States.  Then what scope will be left for lawful RRP?

If you would like to discuss any of these issues please do not hesitate to contact us.