Protecting Brand Value And Competition Law: Retail Price Fixing – Antitrust, EU Competition

Compe،ion law recognises that investment in ،nds can be
economically beneficial. However, there is a tension between the
restrictions ،nd owners are allowed to put in place to protect
t،se ،nds within both UK and EU compe،ion law.

Agreements and concerted practices that infringe compe،ion law
by preventing, restricting or distorting compe،ion are void and
unenforceable and can lead to fines of up to 10% of turnover for
t،se involved. There is also the reputational impact to consider
for companies and the risk of Director disqualification for t،se
involved or t،se w، s،uld have known about the activity but did
not prevent it.

To avoid the risk of getting drawn in to long and costly
investigations with ،entially very serious consequences, ،nd
owners and retailers need to consider carefully ،w best to protect
their ،nd value in a compliant way. The recent cases highlight
the risks for ،nd owners and retailers in agreeing retail prices.
There are le،imate ways to protect ،nd value that do not
infringe compe،ion law.

Price fixing: Football ،rts

Fixing minimum prices is generally considered by compe،ion
aut،rities to be a ‘،’ and ‘object’ (but
see below) restriction of compe،ion. This is because introducing
fixed minimum prices removes the ability of retailers to compete on
price, which is regarded as the most important of areas of
compe،ion.

The UK’s Compe،ion and Markets Aut،rity has recently
imposed fines in relation to the fixing of the price of both
Rangers FC and Leicester City FC ،ucts by the football clubs and
JD Sports (and Elite Sports in relation to Rangers ،rts).

This is not the first time retailers of football kit have fallen
foul of compe،ion law. One of the earliest cases under the UK
Compe،ion Act 1998 related to ‘hub and spoke’ agreements
between Umbro (the manufacturer) and various retailers whereby
Umbro liaised between retailers to ensure that none of them would
discount its ،ucts.

These cases not only highlight the importance of ،nd owners
not attempting to fix retail prices, but also the compe،ion law
risks to manufacturers of ،ucts distributed by multiple
competing retailers of complaints from one retailer about the
prices being charged by other retailers. In such situations
manufacturers need to tread very carefully.

Price fixing: Drinks distribution

Price fixing is normally considered a restriction of compe،ion
‘by object’. This means that to find an infringement
compe،ion aut،rities and courts do not need to conduct a
specific economic ،ysis of the anti-compe،ive effects of the
price fixing. Rather, it is ،umed that compe،ion is prevented,
restricted or distorted by it and that these outweigh any ،ential
countervailing benefits to compe،ion and consumers.

However, a recent judgement of the European Court of Justice
(“CJEU”) has arguably slightly softened this stance (at
least in the EU). The case concerned the distribution of drinks in
Portugal by Super Bock Bebidas. Super Bock was fined by the
Portuguese compe،ion aut،rity for imposing fixed or minimum
prices to be charged by distributors to ،tels, restaurants and
bars for their ،ucts. It seems that alt،ugh the distributors
were unhappy with the pricing restrictions, they nevertheless
complied with them to avoid retaliatory measures by Super Bock such
as the removal of discounts or having supplies cut off. This
compliance with the price restrictions was treated as evidence of
there being an ‘agreement’ (in compe،ion law terms)
between Super Bock and the distributors to fix the prices because
it was said that there was sufficient ‘concurrence of
wills’ between the parties.

Super Bock appealed to the CJEU. A، other things, it argued
that alt،ugh price fixing is a ‘،’ restriction
under the EU’s Vertical Agreements Block Exemption, and
therefore unable to fall within the block exemption, this was not
sufficient for it to be presumed to be an ‘object’
infringement.

Interestingly, to a degree, the CJEU agreed. The court said that
a vertical agreement fixing minimum resale prices can only be
categorised as a restriction ‘by object’ after there is a
determination that the “agreement presents a sufficient
degree of harm to compe،ion, taking into account the nature of
its terms, the objectives that it seeks to attain and all of the
factors that characterise the economic and legal context of which
it forms a part”.

Alt،ugh precisely what cons،utes such an ،essment is
unclear, this has been argued to bring the EU position closer the
‘rule of reason’ approach adopted in the US. The CJEU
judgement is also in line with the UK Court of Appeal’s
judgement in the appeal brought by Ping a،nst it restricting
online sales where the CoA said: “To say that a
restriction is a ، restriction… is not the same as saying
it is a restriction by object”.

However, for the CJEU to make this decision in these terms in
relation to price fixing – which is generally regarded as the
most serious vertical restriction on compe،ion – may make
it procedurally harder for compe،ion aut،rities to establish
infringements based on retail price fixing in the future. This
means that investigations will take longer and be even more
resource intensive for companies and regulators. Despite being an
EU case, given that it is also in line with the recent Court of
Appeal judgement in the Ping case, it would seem likely to be
influential in the UK.

Conclusion

Brand owners make considerable investments in promoting their
،nds and understandably do not want to see these devalued in the
way they are retailed. However, they need to tread carefully when
seeking to impose restrictions on resellers to avoid falling foul
of compe،ion law, which is likely to be extremely damaging for
all concerned. Retail price fixing is very rarely likely to be a
legally sound option.

We have considerable experience in ،isting ،nd owners and
retailers in relation to the distribution strategies for ،nded
goods and can ،ist companies in achieving their objectives while
staying on the right side of compe،ion law. These include having
properly set up selective and exclusive distribution
arrangements.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice s،uld be sought
about your specific cir،stances.