On
Legal Framework
Art. 101 (1) of the EU treaties as well as Art. 3 of the Luxembourg Competition Act prohibit agreements between companies that have as their object or effect the prevention, restriction, or distortion of competition within the market. This does not only apply to direct competitors, but also extends to vertical agreements (such as distribution contracts) between parties on different levels of the supply chain.
So-called resale price maintenance refers to vertical agreements between suppliers and distributors, in which the latter commit not to deviate from a certain retail price. Agreements in which the retailer is no longer free to determine his own pricing policy are considered to be resale price maintenance agreements that have as their object the distortion of competition. Non-binding price recommendations on the other hand are typically not caught by this prohibition, as long as the retailer is free to set a price lower than the respective recommendation.
Legal test applicable in Luxembourg
While the first condition is easily met where a supplier communicates recommended resale prices, the second element requires - in addition to mere supervision of prices at retail level - an element of ensuring that the recommended prices are also applied throughout the distribution network. With respect to the third criterion, the
Decision
In 2015, the
While the text of the decision and the legal qualification of the three-tier test is not yet in the public domain, the
The decision also gives insight into the fine setting practice of the
Implications for companies with distribution agreements
The decision has important implications for businesses with a Luxembourg retail or distribution presence. The Council underlined that it will prosecute not only suppliers but also retailers forming part of a resale price maintenance mechanism that distorts competition on the Luxembourg market. The decision of the Luxembourg authority must be understood as clear signal to companies that resort to or abide by resale price recommendations to act within the confines of applicable competition law. In this respect, multinational companies with a Luxembourg presence are warned that fines may not proportionally correlate to the volume of sales on the Luxembourg market, but can be increased for deterrence.
The expertise and service of
As Luxembourg's leading law firm with a vast European reach and expertise, we can assist in understanding EU and national applicable legal frameworks and review distribution agreements with a focus on their compliance with applicable Competition law rules.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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