On 15 December 2011, the French Competition Authority (the FCA) adopted a decision by which it sanctioned Kontiki, exclusive supplier in France of products featuring the Diddl mouse character, for having entered into an anticompetitive agreement with its retailers, between 2003 and 2007, on resale prices of these products. The FCA’ s decision is surprising regarding the determination of the amount of the financial penalty, and in particular the reduction of the base amount of the fine by no less than 90 per cent, even though such base amount was calculated following the guidelines recently adopted by the FCA, thus concretely illustrating the flaws which were the object of criticisms by practitioners on this issue.
During the second half of the 2000s, Diddl products were a great success on the market for gadgets and novelty items for children and young teenagers. At that time, Kontiki, exclusive supplier of Diddl products in France, earned almost all of its turnover from the sales of Diddl products. Kontiki also ran the French Internet domain of Diddl under the name “Diddl.fr”.
For the distribution of Diddl products, Kontiki promulgated a “Diddl charter”, which constituted the framework for its commercial relation with resellers. By signing this draft, resellers agreed in particular to apply recommended prices, a condition they had to fulfil to be mentioned on the website “Diddl.fr”
While the application legislation does not forbid recommended retail prices, the FCA considered in the present case that such a condition had in fact as its object the imposition of a resale price on retailers, who understood that the prices recommended by Kontiki actually constituted prices which must be maintained and which, to a large extent, they applied.
While recalling that resale price maintenance is among the most serious anticompetitive practices, the FCA tempered in this case the gravity of the infringement by acknowledging that no coercive measure had been implemented regarding retailers who did not apply the prices imposed by Kontiki. This argument is surprising as the FCA, having established the existence of resale price maintenance, was not in theory required to verify the latter two criteria applicable to vertical agreements based on a practice of recommended prices, i.e., the implementation of a pricing control system by the supplier and the actual application of these prices by retailers. Yet in the present case, the FCA used the criterion of the absence of a pricing control system to moderate the gravity of the behaviour.
Furthermore, the FCA considered that the damage caused to the economy was relatively limited, the effect of the practice on intra-brand and inter-brand competition having remained limited. As a consequence, the FCA fixed the basic amount of the fine to 9 per cent of the value of sales made by Kontiki in 2005-2006, on a scale which ranges from 0 to 30 per cent in its notice of 16 May 2011 on the method relating to the setting of financial penalties (the Notice).The FCA then applied a multiplying ratio to take into account the duration of the infringement.
However, this period was characterised by the increasing popularity of Diddl. Thus in 2005 Kontiki realised a very exceptional turnover, which then considerably decreased due to the diminution, although not the disappearance of “Diddl mania”. Taking into account this situation which it considers “exceptional and very particular”, the FCA reduced the basic amount of the fine by 90 per cent, thereby implicitly recognising the importance of the individualisation of sanctions.
This decision is the second application by the FCA of its Notice, which was supposed to provide more foreseeability for companies. It illustrates the reservations expressed by practitioners regarding the Notice: not only did the literal application of the Notice in this case lead to fixing a base amount of the fine which was almost twice the legal maximum, but the criteria set out in the Notice represented only 10 per cent of the total calculation, the other 90 per cent enabling the FCA, on the basis of the individual situation of the company, to fix a level of fine which, in the end, remains quite similar to its previous case law.