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The CNMC's recent decision fining ICON for restricting competition confirms that practices related to resale price fixing and restrictions on online sales remain a priority in oversight. The fine imposed on the company, together with a five-month ban on engaging with the public sector, illustrates how certain decisions on retail price (RRP), promotions or online sales can constitute a serious infringement of antitrust rules 'by object'.
The CNMC is continuing on the same path paved by the European Commission in its surveillance of price-fixing practices between manufacturers and suppliers, which have again attracted the attention of competition authorities. Clear examples of this are the recent sanctions imposed by the European Commission on several fashion brands for imposing resale prices for their products on their distributors, which we analysed in this article.
Key aspects
The CNMC found ICON responsible for two infringements of competition 'by object', contrary to article 1 of the Spanish Competition Law (LDC), entailing:
The fixing of resale prices imposed on wholesale distributors
According to the CNMC's ruling, the contracts signed between ICON and its distributors included a clause in which the latter were obliged to heed the prices set by ICON to commercially market its products to hairdressing salons within their respective territories, according to a price list established and revised annually by the company. The distributors were not authorised to charge lower rates than those stipulated in the annual price list.
The setting of online resale prices and commercial conditions
According to the CNMC, ICON imposed on retail distributors resale prices and other commercial terms of sale to the public for its products (including, a cap on maximum discounts, a prohibition to carry out unauthorised promotions or the prohibition to sell on online marketplaces, in particular on Amazon) by various means, such as:
- providing retail distributors with lists of mandatory "RRP rates";
- developing, updating and disseminating standards for online consumer sales and enforcing them via direct communications to their distributors; or
- making and effectively applying threats and/or retaliatory measures in the event of non-compliance.
In addition, ICON implemented a control system by which it monitored the application of prices and/or discounts by its distributors' online shops. This was done through its own staff as well complaints submitted by members of its distribution network when they detected non-compliance by other retailers.
Practices to review
In order to avoid or minimise risks, we recommend that companies review certain aspects of their business:
- Contractual clauses that include references to "mandatory tariffs or rates", "recommended prices that must be observed " or that impose conditions on the application of the RRP.
- Online sales policies that might include absolute prohibitions on sales in certain channels without objective justification or that include certain requirements that could be interpreted as an indirect limitation to engage in e-commerce.
- Commercial communications addressed to distributors that state that "discounts below the RRP will not be accepted", including instructions to keep a uniform price throughout the network, or that make discounts conditional on the manufacturer's authorisation.
- Price monitoring tools, to verify that they are not used to correct or apply pressure on distributors.
Conclusions
This case confirms that resale pricing remains a priority for the CNMC, especially in consumer sectors and in the digital environment. The line between "recommending" and "imposing" prices and commercial terms and conditions is narrow and crossing it can lead to million-euro fines, bans on engaging with the public sector and damages, as well as serious reputational harm.
Training for commercial teams with clear guidance on where the red lines lie is essential to ensure compliance with competition rules and to avoid the risk of infringement.
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.
