1. Introduction
The Competition Board (the "Board") has concluded its preliminary investigation into Sezen Gida Mad. Tarim ve Hayvancilik Ürün. Tic. ve San. Ltd. Sti. ("Anavarza"), a company operating as a honey producer/supplier in the fast-moving consumer goods sector under the brand name 'Anavarza'. The Board rendered its decision dated 9 March 2023 and numbered 23-13/209-67 (the "Decision") on the violation of Article 4 of Law No 4054 on the Protection of Competition (the "Law") through the company's practice of resale price maintenance ("RPM"). The Decision sets out quite intriguing findings regarding the determination of the resale price. Although no infringements were found as a result of the preliminary investigation, the Decision addresses many practical points regarding the practice of RPM that other undertakings should take into consideration with a view to reinforcing the compliance of their existing vertical relationships with the Law.
2. Assessments on RPM
Considering the recent escalation in the number of RPM practices, the Board has provided certain principles regarding the theoretical framework of RPM in the Decision.
In many investigations regarding the practice of RPM, it has been revealed that the practice of RPM qualifies as a restriction of competition by object. Within the frame of the precedents of the Board on the practice of RPM, it has been concluded that RPM appears as a violation of competition by object, regardless of whether it has an actual effect on the relevant market or not, and if practices that restrict competition by object can be identified, it is not necessary to demonstrate their effects in the relevant market in order to prove the existence of a violation.
One of the points emphasised in relation to RPM practices is that they may be performed directly or indirectly by the relevant undertakings. As stated in paragraph 18 of the Guidelines on Vertical Agreements, supplier undertakings may directly determine the buyer's sale price by putting explicit provisions in the vertical agreements they have concluded, or they may commit the same infringement indirectly through different practices. In this context, determining a buyer's profit margin, determining the maximum level of discount rate that a buyer can apply in respect of a price level announced as recommended price, granting additional incentives to a buyer in accordance with that buyer's compliance with the recommended prices, or threatening a buyer by delaying or suspending deliveries or terminating the agreement in the event of non-compliance with these prices, or actually imposing such penalty payments, are all listed as examples of indirect RPM.
It should be noted that the Board's decision on Henkel[1] – finding a violation due to the existence of RPM – was reversed by the decision of the 13th Chamber of the Council of State dated 6 July 2021 and numbered E. 2021/969, K.2021/2654.. In the chamber's decision, it was emphasised that it is not possible to infer an anti-competitive behaviour or RPM where each undertaking carries out its own independent decision-making process about resale prices, and that pressure or encouragement of any of the parties must be demonstrated in order to prove the presence of an indirect practice of RPM.
3. Analysis of the evidence from Anavarza
The first piece of evidence evaluated in the preliminary investigation was Anavarza's internal correspondence. This included the price list of the undertaking's retail group, as well as the discount rates applicable on this price list and the cash register campaign. Within the scope of this internal correspondence and other customer correspondence, in which Anavarza appears to have made a suggestion to switch to the recommended selling price, it was stated that there was no information or document showing any implication of the undertaking's efforts to convert the recommended shelf prices into fixed prices. At this point, it is understood that the internal correspondence of the undertakings solely regarded the implementation of the recommended selling price, which does not create any competition law sensitivity.
In further evidence examined by the Board, a retail undertaking requested operational support in order to compete with another competing undertaking. Regarding this evidence, the Board emphasised the guideline1 issued by the German Competition Authority (Bundeskartellamt) on vertical price fixing in the food sector. This guideline highlights that:
- In vertical price fixing in relation to the food producers and retailers, the party whose freedom to independently set prices is restricted (i.e. retailers) plays an important role in the infringement; in the absence of a single retail price level, some retailers ask producers/suppliers to intervene with the shelf price; in this context, the infringement not only involves vertical price fixing but also approaches horizontal coordination between retailers; and
- A retailer's request for operational support due to unsatisfactory margins does not constitute vertical price fixing, meaning that the retailer's request does not raise concerns unless it involves a request by the supplier to pressure a competitive retailer to change its pricing policy.
Accordingly, the Board concluded, based on the request for profit margin support made by the undertaking, that the undertaking had requested support for its own price policy, but had not exerted any pressure to cause intervention with competitors. Another issue subject to evaluation concerned statements regarding the updating of purchase and shelf prices contained in the weekly notes of Anavarza's sales representatives. It was concluded that neither Anavarza's monitoring of the prices of its own product and its competitors' products, nor the reporting inside Anavarza of information that the shelf prices at the points of sale have been updated, actually entail any infringement. These reports can only be characterised as RPM if communications indicating that there has been intervention with the monitored prices are detected.
In other internal correspondence, which is important to interpret, it was stated that one of the retailers had changed its purchase prices, but had not yet updated its shelf prices, which could cause problems for other retailers. The Board stated that this conversation gave rise to the suspicion that Anavarza had intervened in the retail price. However, since it is considered an internal communication within the undertaking, it does not prove any agreement made by the undertakings on the shelf price to be applied. Moreover, it was stated that no information and documents were found that show any pressure or threats from Anavarza regarding the implementation of the determined shelf prices.
Finally, in addition to the on-site inspection documents, Anavarza's contracts with retailers were examined and it was determined that there was no arrangement regarding resale prices under the contracts.
4. Conclusion
Factoring in the recently announced "Arçelik Decision"2 and "Samsung Decision,"3 in which infringements were found due to the RPM practice, and the fact that high administrative fines were imposed on those undertakings, it seems that the Board has shifted its focus to the subject of RPM nowadays and imposed severe sanctions for RPM violations. It is important for the undertakings to take the necessary measures to avoid any RPM violation by taking into consideration the analysis made in the Anavarza decision, especially in this period when the Board's sensitivity towards RPM has increased.
Footnotes
1. Guidance Note on the Prohibition of Vertical Price Fixing in the Brick-and-Mortar Food Retail Sector. 50 ( link: https://www.bundeskartellamt.de/SharedDocs/Publikation/EN/Others/Guidance_note_prohibition_vertical_price_fixing_LEH.pdf?__blob=publicationFile&v=2), Access Date: 14.02.2023
2. Board decision dated 03.08.2023 and numbered 23-36/682-235.
3. Board decision dated 03.08.2023 and numbered 23-36/671-227.
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