With decision of June 29, 2023 (in the proceeding C-211/22, Super Bock Bebidas SA, AN, BQ v. Autoridade de Concorrência), the European Court of Justice decided on the interpretation of the rules of Reg. No. 2790/1999 and No. 330/2010 on price fixing, in the context of an exclusive distributorship contract.
The judgement is very interesting, because it clarifies certain important notions. Firstly, the Court states that the notion of ‘hardcore restrictions’ does not coincide with that of ‘restriction by object’. In addition, the Court provides further important indications for national Courts to be considered where envisaging a restriction by object.
The dispute concerns the contractual relationship between Super Bock, a company established in Portugal that manufactures and markets beers, bottled waters, and other drinks, and its exclusive distributors appointed for (part of) the Portuguese market, with specific regard to the “Ho.Re.Ca.” sector.
In that framework, for a long period of time (2006-2017) Super Bock allegedly imposed to its Portuguese distributors a minimum resale price. Particularly, distributors were required to report to Super Bock relevant data on resale. In the event of non-compliance with those prices – based on the reconstruction of the facts made by distributors, in accordance with the terms of business set by Super Bock, there were ‘retaliatory’ measures, such as the removal of financial incentives, comprised of trade discounts on the purchase of products and the reimbursement of discounts applied by distributors to resale, and the refusal to supply and replenish stocks.
The Competition Authority considered that that practice constituted an infringement of the competition rules, within the meaning of Article 9(1)(a) of Portuguese law No. 19/2012 as well as of Article 101(1) TFEU. The Tribunal da Concorrência, Regulação e Supervisão (Competition, Regulation and Supervision Court, Portugal) confirmed the decision of the Competition Authority.
Super Bock, AN and BQ brought an appeal against that judgment before the Tribunal da Relação de Lisboa (Court of Appeal, Lisbon, Portugal), which is the referring court to the ECJ in the case commented here.
- The question referred to the European Court of Justice.
In the above-mentioned circumstances, the Tribunal da Relação de Lisboa (Court of Appeal, Lisbon) decided to stay the proceedings and to refer the following questions to the Court of Justice for a preliminary ruling:
«(1) Does the vertical fixing of minimum prices constitute in and of itself an infringement by object which does not require a prior analysis of whether that agreement is sufficiently harmful?
(2) In order to demonstrate that the “agreement” element of the infringement consisting in the (tacit) fixing of the minimum prices to be charged by distributors is present, is it necessary to show that the distributors actually charged the fixed prices in the case in question, in particular by direct evidence?
(3) Do the following factors constitute sufficient evidence of the commission of an infringement consisting in the (tacit) fixing of the minimum prices to be charged by distributors: (i) the sending of lists containing minimum prices and margins for distribution; (ii) asking distributors for information on the selling prices they charge; (iii) complaints from distributors (where they consider the resale prices imposed on them to be uncompetitive or find that competing distributors do not adhere to them); (iv) the existence of price-tracking mechanisms (as a minimum); and (v) the existence of retaliatory measures (even though it has not been demonstrated that these have actually been applied)?
(4) In the light of Article 101(1)(a) TFEU, Article 4(a) of Regulation No 330/2010, the European Commission’s Guidelines on Vertical Restraints and the case-law of the European Union, can an agreement between a supplier and its distributors which (vertically) fixes minimum prices and other terms of business applicable to resale be presumed to be sufficiently harmful to competition, without prejudice to an analysis of any positive economic effects arising from such a practice, within the meaning of Article 101(3) TFEU?
(5) Is it compatible with Article 101(1)(a) TFEU and the case-law of the European Union for a judicial decision to find that the presence of the objective defining element of an “agreement” between a supplier and its distributors is proved on the basis of:
(a) the fixing and imposition, by the former on the latter, on a regular, universal and unchanging basis during the period of the practice, of the terms of business which the latter must fulfil when reselling the products they acquire from the supplier, in particular the prices they charge their customers, principally in terms of minimum prices or average minimum prices;
(b) the fact that the resale prices imposed are notified either verbally or in writing (via e-mail);
(c) the fact that distributors are unable to fix their resale prices independently;
(d) the customary and universal practice whereby the supplier’s employees ask distributors (by telephone or in person) to adhere to the prices indicated;
(e) the universal adherence by distributors to the resale prices fixed by the supplier (other than in the event of occasional disagreements) and the finding that the conduct of distributors on the market is generally in keeping with the terms laid down by the supplier;
(f) the fact that, in order not to breach the terms laid down, distributors themselves often ask the supplier to tell them what resale prices to charge;
(g) the finding that distributors frequently complain about the prices set by the supplier rather than simply charging other prices;
(h) the fixing by the supplier of (reduced) distribution margins and the assumption by distributors that those margins correspond to the level of remuneration payable for their business;
(i) the finding that, by imposing low margins, the supplier imposes a minimum resale price, as the distribution margins would otherwise be negative;
(j) the supplier’s policy of granting discounts to distributors on the basis of the resale prices actually charged by them – the minimum price previously fixed by the supplier being the level of the price of restocks at sell-out;
(k) the need for distributors — in the light in many cases of the negative distribution margin — to adhere to the resale price levels imposed by the supplier; the practice of lower resale prices is followed only in very specific circumstances and where the distributors ask the supplier for a further discount at sell-out;
(l) the fixing by the supplier of, and the adherence by distributors to, the maximum discounts which are to be applied to the distributors’ customers, which has the effect of imposing a minimum resale price, as the distribution margin would otherwise be negative;
(m) the direct contact between the supplier and the distributors’ customers and the fixing of the terms of business subsequently imposed on distributors;
(n) the supplier’s intervention, on the distributors’ initiative, inasmuch as it is the supplier that makes the decision to apply certain trade discounts or renegotiates the terms of business for resale;
(o) the fact that distributors ask the supplier to authorise them to conclude a particular transaction on certain terms in order to ensure their distribution margin?
(6) Is an agreement on the fixing of minimum resale prices which exhibits the characteristics described above and covers almost the entire national territory capable of affecting trade between Member States?» (see § 19 of the Court decision).
- The most relevant aspect: the concept of ‘restriction by object’.
As anticipated, the most relevant aspect of this judgement, in our view, regards the clarifications provided by the Court of Justice with reference to the concepts of ‘restriction by object’ and ‘hardcore restrictions’. We will therefore limit our comment to this particular aspect.
The ECJ – after having remarked that it is not for the Court of Justice, but for the referring court to determine in the end whether, taking account of all of the information relevant to the situation in the main proceedings and the economic and legal context of which it forms a part, the agreement at issue has as its object the restriction of competition (see § 28) – expressed some important principles and guidance.
At first, the ECJ recalled that, in order to be caught by the prohibition laid down by Article 101(1) TFEU, an agreement must have as its ‘object or effect’ the prevention, restriction or distortion of competition within the internal market. According to the settled case-law, the alternative nature of that requirement, as shown by the conjunction ‘or’, means that it is first necessary to consider the object of the agreement. Thus, where the anticompetitive object of an agreement is established, it is not necessary to examine its effects on competition (see, §§ 30-31).
However, the concept of ‘restriction of competition by object’ must be interpreted restrictively (§ 32).
The essential legal criterion for ascertaining whether an agreement involves a ‘restriction of competition by object’ is a finding that that agreement in itself presents a sufficient degree of harm to competition (§ 34).
In order to determine whether that criterion is met, regard must be had to the content of its provisions, its objectives and the economic and legal context of which it forms a part. When determining that context, it is also necessary to take into consideration the nature of the goods or services affected, as well as the actual conditions of the functioning and structure of the market or markets in question (§ 35).
In addition, where the parties to the agreement rely on its procompetitive effects, those effects must, as elements of the context of that agreement, be taken into account. Provided that they are demonstrated, relevant, intrinsic to the agreement concerned and sufficiently significant, those effects may give rise to reasonable doubt as to whether the agreement concerned caused a sufficient degree of harm to competition (§ 36).
Moreover, as an important clarification, the ECJ states that the concepts of ‘hardcore restrictions’ and of ‘restriction by object’ are not conceptually interchangeable and do not necessary overlap. It is therefore necessary to examine restrictions falling outside that exemption, on a case by case basis, with regard to Article 101(1) TFEU (see, §§ 38-42).
The Court therefor concluded, on this important aspect, stating that:
«(..) Article 101(1) TFEU must be interpreted as meaning that the finding that a vertical agreement fixing minimum resale prices entails a ‘restriction of competition by object’ may only be made after having determined that that agreement presents a sufficient degree of harm to competition, 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 part.».
- The further interpretation rules provided by the Court of justice.
In addition to the above, the ECJ interpreted the concept of ‘agreement’ as well as that of ‘effect on trade between Member States’, within the meaning of Article 101(1) TFEU and concluded as follows:
«(..) Article 101(1) TFEU must be interpreted as meaning that there is an ‘agreement’, within the meaning of that article, where a supplier imposes on its distributors minimum resale prices of the products that it markets, if the imposition of those prices by the supplier and compliance with them by the distributors reflects the expression of the concurrence of wills of those parties. That concurrence of wills may be shown from the terms of the distribution contract at issue, where it contains an express invitation to comply with minimum resale prices or authorises, at the very least, the supplier to impose those prices, as well as from the conduct of the parties and, in particular, from any explicit or tacit acquiescence on the part of the distributors to an invitation to comply with minimum resale prices.
Article 101 TFEU, read together with the principle of effectiveness, must be interpreted as meaning that the existence of an ‘agreement’, within the meaning of that article, between a supplier and its distributors, may be established not only by means of direct evidence, but also on the basis of objective and consistent indicia from which the existence of such an agreement may be inferred.
Article 101 TFEU must be interpreted as meaning that the fact that a vertical agreement fixing minimum resale prices covers almost the entirety, but not all, of the territory of a Member State does not prevent that agreement from being capable of affecting trade between Member States.»
Silvia Bortolotti, Secretary General IDI, IDI Country Expert for Italy