Determining retail prices

Subject: Determining retail prices

SME brand manufacturers in the EU are not allowed to stipulate the retail price to be charged for their products by independent European distributors, even if a commercial distribution agreement has been signed. This, combined with increasing online sales and competitive undercutting, is unfortunately causing a loss of confidence, to the detriment of manufacturers and also traders, who are no longer willing to purchase such products, since their profit margins are no longer even sufficient to cover operating expenses. In other countries, the problem has been solved by allowing small and medium- sized manufacturers to conclude contracts with independent traders stipulating adherence to the brand retail price and even authorising manufacturers to terminate the contract and seek the return of their branded products, should this be necessary.

In view of this, can the Commission say how manufacturers can require traders to ensure adherence to stipulated retail prices?

Answer given by Ms Vestager on behalf of the European Commission

(17 May 2019)

The question relates to agreements between manufacturers and their distributors. Under competition law, such agreements are referred to as vertical agreements.

In general, non-binding resale price recommendations and maximum resale prices among two or more parties entering into vertical agreements are exempt from the prohibition of Article 101(1) of the Treaty on the Functioning of the European Union (TFEU) when the market share of each of the parties do not exceed a 30% threshold (1).

Moreover, if parties with a very small market share, which will often be small and medium-sized enterprises (SMEs), enter into vertical agreements, many of the clauses therein may benefit from the de minimis notice (2); in other words, they will fall outside the scope of Article 101 TFEU for lack of appreciable anticompetitive effects.

However, neither the Commission’s block exemption regulations nor the de minimis notice permit so-called by object restrictions, including Resale Price Maintenance clauses (RPM), which impose requirements on distributors to observe a fixed or minimum price level. Clauses of this type will be caught by Article 101(1) TFEU, since they are prone to restrict competition between distributors.

These clauses are not always illegal. The Commission has issued guidance on this point, explaining the circumstances under which Resale Price Maintenance clauses can be compatible with EU competition law (3).

The Vertical Block Exemption Regulation and accompanying Guidelines are currently being evaluated. In this context, a public consultation (4) is ongoing, so that stakeholders have the opportunity to provide evidence on the functioning of the current rules.

⋅1∙ Commission Regulation 330/2010 of 20 April 2010 on the application of Article 101(3) of the Treaty on the Functioning of the European Union to categories of

vertical agreements and concerted practices, OJ L 102, 23.4.2010, p. 1-7 (Commission’s Vertical Block Exemption Regulation). ⋅2∙ Commission Notice on agreements of minor importance which do not appreciably restrict competition under Article 101(1) of the Treaty on the Functioning of the

European Union (De Minimis Notice), OJ, C 291, 30.8.2014.

⋅3∙ Guidelines on Vertical Restraints, OJ C 130, 19.5.2010, p. 1‐46, para. 225.

⋅4∙ https://ec.europa.eu/info/law/better-regulation/initiatives/ares-2018-5068981/public-consultation_en