Let's talk antitrust

The price is not right – online RPM and sales bans in the spotlight

Video | October 2018 | 00:07:22

Video Details

Let's talk antitrust

Ian Giles: Richard, really good to see you again. Today, I wanted to talk about RPM – resale price maintenance – which is a topic that competition lawyers are aware of, but there hasn’t been a huge amount of enforcement in a while. In July, we saw the European Commission impose fines on four companies totalling over €100 million; the first RPM enforcement since 2003 and flowing from their e-commerce sector investigation which looked at a number of practices in respect of online selling. What are your reactions to that move?

Richard Whish QC: Well, I think it is very interesting. I mean, the first point, of course, is that the reason the Commission hasn’t been enforcing Article 101 in vertical cases for 15 plus years is that the rules have been relatively clear for a long time; block exemption, fairly adequate vertical guidelines, and Regulation 1 decentralises the ability to enforce competition law to the Member States. Many distribution practices exist along national lines and so it has been left to the OFT/CMA, the BKA, the Polish authority or whoever to do the enforcement. So, I think that makes total sense, but then we enter the digital age and the Commission decided to have the market study of e-commerce which published in May last year and, of course, as you know, in the course of the investigation they discovered a lot of restrictions. I suspect, actually, probably more restrictions than they expected in the online world and I actually think what they’ve been doing here is the right thing to do which is to say, take a holistic view of the market, identify problems and then select some candidate cases for enforcement. Because, ultimately, you educate the business world and the legal world with the market study, but also with the subsequent enforcement action. So, I think what they’re doing makes a lot of sense.

Ian Giles: It’s interesting, actually, in all of these cases, the parties settled and received a significant reduction in fines, so obviously didn’t feel they had a strong counter argument.

Richard Whish QC: Well, I find that an immensely interesting aspect of this case because, as we all know, there have been settlements in cartel cases now for ten years since the Settlement Notice but that settlement system was for cartels. There is no Settlement Notice as such for vertical agreements nor for abuse of dominance, but two years ago the Commission did settle an abuse of dominance case – ARA, Austrian recycling foreclosure – and gave a reduction in the fine because ARA admitted that they had been guilty of an abuse and offered very suitable remedies from the Commission’s point of view. And, here, we find the Commission saying that these people admitted that they were infringing the law pre-SO, that’s a very important point – before the Statement of Objections – and the Commission says, well, this is very helpful from our point of view and so in one case the reduction of the fine was 50 per cent and in the other three it was 40 per cent. So, I have no doubt it’s a model that the Commission will intend to use in future enforcement actions as well.

Ian Giles: And higher than you generally see in the cartel cases… 

Richard Whish QC: Yes, except that, of course, in the cartel case, the 10 per cent reduction is for the settlement, but you can still get leniency reductions for bringing evidence to the table and my understanding is in these vertical cases there is an element of both.

Ian Giles: What’s your take on this? We had, a number of years ago now, the debate when the US moved to a “rule of reason” approach in some of the states with the Leegin ruling that RPM ought to be seen in a different way, not as serious as a “by object” infringement, such as classic cartel price fixing. And that, actually, if you’ve got sufficient inter-brand competition, which for these types of electronic consumer goods you would assume there are – so if my price is fixed by the retailer of a particular, let’s say, television, I can always go and get another television – is it right that the Commission should be intervening in this slightly heavy handed way?

Richard Whish QC: Well… heavy handed. I would make a number of points there. The first is, people talk about the US move from per se to rule of reason because RPM was per se unlawful and post-Leegin it’s not. Let me just point out there is no per se rule under Article 101 because even an agreement that restricts by object under 101(1) can, if the evidence is there, be justified under 101(3). We have never had a per se rule so I would argue that actually US law has caught up with EU law. But I seem to be the only person in the world who actually thinks that, but I’m sure technically it’s correct. Separate point, RPM has always been treated as an object restriction in the EU for the purposes of 101(1).

Ian Giles: And, I mean, just to link that again to another recent development – the Ping case – where again it’s a case very much focused on online selling. Is it legitimate to require that sales be made through bricks and mortar outlets in order to ensure the right sales approach for these particular products? That seems consistent with this overall framework, but there are a couple of interesting points.

Richard Whish QC: Yes, well, I mean Ping is interesting. Of course, it’s not an RPM case as such; it’s a case in which Ping was saying to its bricks and mortar dealers that we’d like that you maintain this custom fitting service and you cannot sell online at all, so it’s an outright restriction on online sales. Now, if you look at the Court of Justice jurisprudence on this to date, you’ve got, on the one hand, Pierre Fabre about five years ago where the Court of Justice said an outright restriction on online sales was an object restriction. More recently, in Coty, the Court of Justice said, well in this case, online sales by the authorised dealers are permitted, there’s a restriction on selling through third party market places, Ebay, Amazon, we’re happy with that. So, the interesting thing about Ping is where does it fit in as between Pierre Fabre and Coty, and the Competition Appeal Tribunal in its judgment the other day said this is Pierre Fabre. This is an outright sales ban. It is an object restriction. We’re not convinced that there is any kind of objective necessity justification for the practice and if you, Ping, want to argue that there are economic efficiencies, you can do so under Article 101(3) or Section 9 which is the equivalent in domestic law, you ran your evidence and it hasn’t convinced us. So, in the end, it seems to me it’s consistent with the Court of Justice and also the spirit of these vertical cases of the Commission.

Ian Giles: Thank you very much, Richard.