Belgium: Apply, Rinse, Repeat: Belgian Competition Authority Reimposes Fine On Caudalie Group For Active And Passive Sales Restrictions And Retail Price Maintenance

On 18 January 2023, the Belgian Competition Authority ("BCA") reimposed a fine of almost EUR 860,000 on the companies of the Caudalie group for having imposed minimum retail prices and passive sales restrictions on their selective distributors.

The case goes back to 2018, when the Belgian and French competition authorities carried out dawn raids (on-site inspections) at Caudalie, which culminated in a fining decision by the BCA in 2021. On top of the fine, the BCA also made certain binding commitments which the Caudalie group had proposed. Caudalie argued that the BCA did not have jurisdiction both to impose a fine and, in addition, accept and make binding commitments which the investigated party had proposed. The Brussels Markets Court agreed and quashed the BCA decision. In last month's decision, the BCA reimposed the original fine, without further commitments.

Fine maximum

The BCA's fine is relatively modest, particularly for two infringements which it considers to constitute "hardcore infringements by object" of competition law.

While not entirely clear on the basis of the non-confidential version of the 2021 decision, it is likely that Caudalie was able to benefit from the old fine maximum, which provided that the BCA could not impose fines higher than 10% of the undertaking's Belgian turnover.

This fine maximum has since been amended and the BCA can now impose fines up to 10% of the undertaking's worldwide turnover.

New competition regime for distribution contracts

Since the original 2021 decision, a new regime for distribution contracts was adopted at EU level.

The Vertical Block Exemption Regulation and Vertical Guidelines provide that, subject to a number of conditions being fulfilled, vertical agreements which contain certain restrictive clauses are exempted from the general prohibition on anticompetitive agreements. One of those conditions is that the contract cannot contain any so-called hardcore restrictions, such as active and passive sales restrictions or retail price maintenance clauses.

Sales restrictions in selective distribution systems

Under the new rules, the main principles governing restrictions of a distributor's sales into a specific territory or to a specific customer group have remained largely the same: in principle, these are hardcore restrictions which remove the benefit of the block exemption.

There are a number of exceptions. For selective distribution systems, the most important ones include:

• Restrictions on active¹ sales by selective distributors into a territory or to a customer group which is reserved for the supplier or the supplier's exclusive distributors. Contrary to the previous version of the VBER, the supplier can now also require that its distributor roll over that active sales restriction to the latter's direct customers (but not further).
• Restrictions on active or passive² sales by selective distributors to unauthorised distributors located within the territory where the selective distribution system is operated. Under the new rules, such a restriction can be rolled over onto the distributor's customers without limit.
• Restrictions on active or passive sales to end users by selective wholesale distributors.

A general principle for selective distribution remains that cross-supplies between the different authorised selective distributors cannot be restricted.

Retail price maintenance

The main rules concerning retail price fixing are maintained under the new regime: minimum retail prices are considered hardcore restrictions. Maximum and recommended retail prices are allowed if they are not in fact disguised minimum prices (e.g., when a supplier exerts pressure on its distributor to comply with the recommended price or grants incentives to distributors who sell at the maximum price level). Indirect forms of retail price maintenance, such as fixing distribution margins or setting maximum discount levels, are equally considered hardcore restrictions.

The new Vertical Guidelines also clarify that minimum advertised prices ("MAPs") can amount to retail price fixing if suppliers sanction retailers for selling below the MAPs.

In contrast, some comfort is provided in the case of fulfilment contracts. Fulfilment contracts are contracts between a supplier and a distributor under which the latter executes a prior agreement between the supplier and a specific end-user. The Guidelines clarify that where the end-user has explicitly waived its right to choose the distributor, the supplier can require the distributor to fulfil the contract at a set price.

Footnotes

1 Active sales are sales which are instigated by the distributor and not by the customer, for example following direct mail campaigns.

2 Passive sales are sales made to customers who have not been actively targeted by a seller. Examples include sales made following general advertising activity, promotions made through media, online sales, use of search engine optimisation tools or other techniques intended to improve visibility online.

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