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Competition Law

Analysis - debate - current awareness

24 MAY 2013

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By John Cassels

Vertical price fixing, also known as resale price maintenance, is one of the more serious infringements of the EU competition rules. Agreements which include provisions that restrict a buyer's ability to determine its sale price are presumed to fall within the scope of the prohibition on restrictive agreements and not to meet the criteria for individual exemption. In addition, under the Vertical Restraints Block Exemption, such agreements cannot benefit from the Block Exemption. 

Why, then, is it lawful for newspaper proprietors to supply newspapers to retailers with the price printed on the front of the paper? Is that not fixing the resale price for retailers? And what about other fast-moving-consumer-goods, such as packs of biscuits or chocolate bars that are sometimes supplied to retailers with the price emblazoned on the packaging? 

What appears to be unlawful vertical price fixing can be lawful for any one or more of the following reasons:

  • Fixing the price at which buyers sell is generally prohibited. However, recommending the price or setting a maximum price at which wholesalers or retailers sell, is generally lawful. Insofar as the price is stated to be the maximum retail price (wording to this effect is often included in the small print), then the apparent price fix is likely to be lawful.
  • Fixing the resale price for promotions and/or for new product launches can also be permitted in some circumstances and provided the promotion or campaign only lasts for a limited period.
  • The competition rules on vertical price fixing only apply if there is an agreement between undertakings. Therefore, if and to the extent that the resale price is determined via a unilateral decision of the supplier, rather by agreement between supplier and reseller, then the rules on restrictive agreements cannot apply. The line between unilateral decision and implicit agreement is often unclear, but Volkswagen and Bayer have both successfully argued that what would have been an unlawful agreement was actually a lawful unilateral decision. However, lots of others have not been successful.

If you would like to discuss these issues, please do not hesitate to contact John Cassels at john.cassels@ffw.com.

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