During the current COVID-19 pandemic, antitrust/competition law in the EU
and UK has focused primarily on competitor cooperation and price increases
of certain products, such as face masks, hand sanitizer, paracetamol,
bottled oxygen and ventilators. However, there are also issues to consider
concerning “vertical arrangements,” such as supply and distribution
Particularly where non-competitors are involved, the risk arising out of a
“vertical” arrangement is generally lower than with “horizontal”
cooperation arrangements between competitors. Nevertheless, there are
provisions which are usually treated as serious infringements of the law,
regardless of the size of the company, if included in vertical
These provisions include restrictions on cross-border (“parallel”) sales
between EU countries (plus the UK) and resale price maintenance (setting a
minimum or fixed resale price) (RPM) in distribution/resale agreements.
This remains the case during the ongoing COVID-19 pandemic.
Maximum resale price clauses are also receiving particular attention. A
manufacturer may wish to impose a maximum resale price on its distributors
or resellers in order to protect the end-user and the manufacturer’s
reputation. In addition, recommended resale prices (RRPs) may be used more
frequently in order to guide distributors.
On 23 March 2020, the European Competition Network of national regulators
in the EU (ECN) issued a
on the application of competition law in the EU during the COVID-19 crisis.
This expressly dealt with maximum resale prices:
“… it is of utmost importance to ensure that products considered
essential to protect the health of consumers in the current situation
(e.g. face masks and sanitising gel) remain available at competitive
prices … In this context, the ECN would like to point out that the
existing rules allow manufacturers to set maximum prices for their
products. The latter could prove useful to limit unjustified price
increases at the distribution level.”
These “existing rules” need to be applied carefully. Generally, so long as
the manufacturer/supplier (in its selling market) and the buyer (in its
purchasing market) have market shares below 30 percent, maximum resale
prices are legal and raise no concerns under EU and UK
antitrust/competition law, provided that the figure which is set does not
become a de facto fixed price as a result of pressure from, or
incentives offered by, the supplier.
Maximum resale prices may legally be used above those market share
levels, but there would then need to be an individual analysis of the
arrangement. A key issue here will be the market position of the supplier.
The stronger its market position, the higher the risk that a maximum resale
price will lead to a uniform application of that price and give rise to
Even where the supplier does have a strong position, it is likely that
there will be more flexibility in the current situation than is normally
the case. Often a detailed analysis, coupled with robust legal advice and a
reasonable attitude to risk, will allow a company to decide that an
arrangement can go ahead.
Similarly with RRPs, if the 30 percent maximum market share thresholds are
not exceeded, they can usually freely be used, so long as the figure does
not become a fixed or minimum sale price as a result of pressure from, or
incentives offered by, the supplier. Above that threshold, there is more
risk, particularly if the supplier has a strong market position, but there
may be more flexibility than before the pandemic.
The Greek Competition Authority has
published some examples where a maximum retail price or recommended price
would be acceptable
The overall message is that suppliers and their buyers who may be looking
to make immediate changes to vertical arrangements in response to the
COVID-19 pandemic should consider the possible antitrust/competition law
issues that may ariseand seek out antitrust law advice in advance of taking
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