Contact: Dieter Hauck & Esther Sowka-Hold; Preslmayr Rechtsanwälte (Austria)
Introduction
In the course of its investigations in the past few years, the Federal Competition Authority (FCA) reported findings of prohibited agreements between suppliers and their respective distributors, primarily in the field of consumer prices. In the wake of these findings, following several drafts and discussions, on July 31 2014 the FCA published its final statement on its legal view on vertical restrictions, in particular regarding resale price maintenance. The statement serves as a guide, particularly for small and medium-sized enterprises to identify and avoid infringements of the cartel ban, especially regarding resale price maintenance. Although the statement is non-binding, it elaborates on which situations (according to the FCA's legal view) will, as a rule, fall under the cartel ban and thus will be prosecuted.
What is resale price maintenance?
In accordance with Austrian case law, the FCA's statement defines 'resale price maintenance' as an agreement or a concerted practice between enterprises on different levels of the supply chain that is intended to or has the effect of preventing (eg, by setting a minimum price level) enterprises from setting their own prices in an individual and autonomous way.
While agreements can be binding or non-binding, concerted practices cover all forms of coordination between enterprises that have not reached the agreement level yet, but aim to or have the effect of restricting competition.
Due to its potential substantial effect on the market, which in a worst-case scenario can lead to significant distortion of competition, resale price maintenance is considered to be a serious restriction, resulting in a rebuttable presumption that an infringement has taken place and preventing the act from being exempt pursuant to the General Block Exemption Regulation. Generally in these cases, the application of the individual exemption of Article 101(3) of the Treaty on the Functioning of the European Union will not be possible. Since the FCA considers resale price maintenance as an intended restriction of competition, Article 101 of the treaty will be applied without the necessity to prove the negative effect on the market.
Resale price maintenance may not only affect the relationship between the parties of the agreement (ie, suppliers and distributors), but also has the potential to be used for indirect horizontal arrangements ('hub and spoke cartels') without direct communication among participants. Strong distributors may be able to force their suppliers to increase prices for the distributor's competitors and thereby enable those distributors to increase their profit margins without risking losing market shares.
