COMPETITION • FRENCH LAW • RESTRICTIVE AGREEMENTS
An alignment of prices charged by several distributors may reveal the existence of an agreement between them and the supplier. Alignment should not be the result of autonomous commercial action: parallelism of behavior does not in itself establish collusion. To establish the distributors’ consent to the supplier’s pricing policy, the French authorities have developed a three-stage or “triple” test using the body of evidence method. According to the Court of Cassation, the triple test applies only in the absence of direct evidence of concerted action, such as an RPM clause. Under this test, there is an exchange of consent if (i) retail prices or maximum discount rates have been discussed by the supplier, (ii) measures to monitor prices have been put in place, and (iii) the recommended prices have been largely applied.
Prices can be “evoked” without the need for them to have been negotiated with distributors or even discussed verbally. Evoking prices can be any process by which the supplier informs its distributor of the retail – but not wholesale – price at which it wishes to sell its product. The negotiation of a purchase price equal to the resale below cost threshold or carried out directly with specialized retailers, without leaving any pricing leeway to the wholesalers in charge of supplying them, or the distribution of price catalogs giving an indicative retail price, correspondence stating a precise multiplier coefficient or a maximum discount rate, or advice given to distributors as to the positioning of the product price are sufficient to fulfill the condition. The same applies to the announcement of a retail price by a supplier at a product launch press conference, which is widely covered by the media. The allegedly limited distribution of a charter prescribing compliance with recommended prices does not call into question the existence of resale price maintenance practices when the recommendations also appear in other documents circulated to all distributors. On the other hand, price alignment cannot be characterized as a restrictive agreement if it can be explained by a cause other than the supplier’s evocation of prices, such as the high level of market transparency due to the publication of public price lists by the major retailers.
Price monitoring involves not only pressure, threats of retaliation and actual retaliation by the supplier, behaviors that fall into an extreme category in the range of monitoring measures, but also less significant actions such as requests for price increases or urgent interventions by the supplier to induce distributors to correct anomalies in their pricing policy.
Finally, the Competition Authority considers that a compliance rate of at least 80% for recommended or indicative retail prices presumes that prices are effectively applied. Below this level, the analysis must be completed by taking into account the dispersion of the prices recorded, by directly observing the concentration of prices close to the recommended retail price. The representativeness of the surveys may not be sufficient to conclude that a practice of compliance with imposed prices exists. For example, in the absence of other corroborating factors, evidence of distributors’ participation in a vertical retail price maintenance agreement is not provided when the price surveys show a compliance rate of around 50%. Similarly, prices reported issued by the Administration (DGCCRF) for a limited period of time do not necessarily have evidentiary value for a longer period of time. Indeed, in order to establish the effective application of prices, the reports must be sufficient in number, cover a fairly large geographical area and concern several products in outlets with diversified distribution methods.Finally, when the manufacturer has distributed recommended prices that vary according to the marketing sector, the Administration must specify the locations where the prices have been recorded. The Court of Cassation has specified that the price readings are only one indication among others and that the price displayed in store is the price actually charged, without taking into account discounts at the cash register.
French case law on the issue of resale price maintenance does warrant criticism both in terms of method and principle. It is satisfied with only limited grounds for considering that each criterion of the triple test has been met. It is sufficient that certain sales outlets have been victims of pressure to characterize a price monitoring policy even though the majority of the members of the network have not been victims of it. The degree of price interference required appears to be much lower than under European law. More fundamentally, the general and per se condemnation of RPM no longer reflects the current state of economic analysis or even the positive law of the most advanced countries in competition law. Indeed, economic theory emphasizes that resale price maintenance can be justified in certain circumstances, such as the launch of a new product where the price has been made known to customers. Adopting a more modern analysis, the U.S. Supreme Court has replaced the per se condemnation of pricing practices between manufacturers and distributors with a case-by-case assessment based on the rule of reason. Maintaining a minimum resale price may stimulate inter-brand competition and compensate for a weakening of intra-brand competition. The Vertical Restraints Guidelines seem to partly agree with this analysis: now it is feasible that resale price maintenance may not restrict competition and may generate efficiency gains.