Resale Price Maintenance (RPM) in The Czech Republic
In recent years practitioners and academia have observed a steady increase of interest in RPM from the Czech Office for the Protection of Competition (the NCA), exactly as had been announced by the NCA in 2007. RPM is explicitly prohibited under Section 3 (2) a) of the Czech Competition Act. To help suppliers and distributors to understand the rules concerning RPM,
the NCA published a detailed guidance paper in 2009 on RPM.
In the Czech Republic, the setting of fixed resale prices or minimum resale prices is prohibited. Maximum price setting on the other hand is not prohibited. Recommended resale prices are also not prohibited, provided that no mechanism has been put in place to either enforce such prices or encourage the parties to adhere to such prices. This includes tying bonuses or rebates to adhering to a given “pricing policy”; delaying or suspending deliveries, or early termination unless a prescribed price level is adhered to; threats, penalties and other sanctions; or making rebates or refunds of marketing costs subject to advertising specific prices. However, fixing the distributor’s margin, fixing the maximum level of discount from a prescribed resale price, imposing a price range, or linking imposed prices to competitors’ pricing are also prohibited.
Even in the absence of an explicit agreement on RPM, the NCA may still find that the supplier has been enforcing RPM against distributors. The NCA will take into account the circumstances of the case including whether or not the supplier has introduced measures to monitor resale prices; measures to ensure that distributors report other members of it’s distribution network who do not adhere to a specific price level; has printed a recommended price on its packaging; or has imposed most favoured nation clauses on its distributors.
The NCA does not shy away from imposing high fines for RPM which may be arguably less dangerous than hardcore cartels. This tendency to impose large fines follows the NCA’s revised guidance from 2018 on penalties, which significantly increased the proportion of revenue value on which the NCA bases its calculations for fines.
Furthermore, the NCA published its position to the questions raised in the European Commission’s Issues Paper on RPM & Resale Restrictions on Vertical Block Exemptions. The NCA maintains that undertakings that wish to benefit from Article 101 (3) of the TFEU are responsible for proving that conditions of that Article were met and therefore procompetitive benefits of
RPM outweigh the negative effects. Such claims shall be based on a legal and economic analysis consisting of assessment of the causal link between RPM and its benefits, absence of other alternatives pursuing the same aim, passing on benefits to the end-consumers and the fact that positive effects of RPM outweigh the negative ones.
RPM viewed through recent Czech case law:
- GARLAND (2022): Historically the highest fine imposed by the Competition Office in the amount of approx. EUR 3.700.000 million to the supplier of gardening equipment and tools. GARLAND itself initiated the RPM and enforced it under the threat of sanctions, which consisted, for example, in blocking the distributor‘s account in the ordering system. The enforcement also led to distributors themselves checking the non-compliance of other distributors (their competitors) with the set retail prices and asking GARLAND for redress, i.e. to ensure uniform retail prices.
- BABY DIREKT (2021): This supplier of children‘s goods threatened its distributors with sanctions or actually penalised them by way of non-delivery of goods if they offered the products to end-customers at prices lower than those set by it. BABY DIREKT was fined approx. EUR 1.700.000.
- ABISTORE SPORT (2020): A company engaged in wholesale of sporting goods through a B2B system (without written contracts), or by telephone or email orders. For some of it’s retailers, ABISTORE SPORT required strict price compliance, otherwise limiting or interrupting the supply of goods or denying the retailer access to the B2B system. ABISTORE
SPORT’s anti-competitive behaviour was confirmed by email communications secured by the NCA in the local investigation.
- LR HEALTH & BEAUTY SYSTEMS (2018): A company that operates a multi-level marketing system selling its products exclusively to a network of dealers with whom it had a partnership agreement. Even though the retail prices were referred to as recommended, the Competititoin Office found that LR enforced these retail prices by stopping the payment of the bonuses to which the dealers were entitled on the basis of their contractual arrangements with LR.
- STRIMA (2022): This supplier of sewing equipment set minimum or fixed retail prices for its retailers, to sell to end-consumers. Compliance with these prices was monitored by STRIMA, and if a retailer failed to comply, it was required to increase prices to at least the set level or was threatened with penalties. The competition was distorted in the markets for household sewing equipment in the Czech Republic and Slovakia. STRIMA thus infringed not only the prohibition laid down in the Czech Competition Act, but also the prohibition laid down in the Article 101 (1) of the TFEU.