A Price Recommendation Should Be Only That
On 20 August 2012, the German competition authority imposed an agreed fine of EUR8.2 million on TTS Tooltechnic Systems Deutschland (TTS) for establishing and implementing a resale price maintenance system. The fine was agreed since the case was finished on the basis of a settlement with TTS.
TTS sells high-quality power tools, exclusively in specialist stores. These stores had been asked by TTS strictly to observe a ‘non-binding price recommendation’ (a recommended resale price) which had been communicated by TTS. They were threatened with disadvantages such as worse conditions or contract suspension if they deviated from this price. This was seen as effectively illegal resale price maintenance (RPM).
The case provides a reminder that the RPM rules in the EU as a whole, including Germany, must be taken seriously. Along with bans on cross-border trade, RPM restrictions are the provisions in vertical agreements (such as distribution or supply agreements) which are most likely to result in fines from the national competition authorities or the European Commission (EC).
‘Agency’ Agreements Must Be Carefully Handled
On 31 July 2012, the UK Office of Fair Trading (OFT) issued a Statement of Objections (preliminary statement of its case) alleging that two online travel agents and InterContinental Hotels Group (IHG) have infringed UK competition law in relation to the supply of room-only hotel accommodation. Details are limited, but the specific allegation is that the two agents both entered into separate arrangements with IHG which restricted their ability to discount the price of room-only hotel accommodation.
This therefore seems to be a type of resale price maintenance case. The IHG chief executive has stated that “[the two online travel agents] have an agency relationship with us. They don’t buy the product – they sell the rooms on our behalf and we pay them a commission. That’s how the industry works . . .”.
Under UK and EU competition law, if an agent is a ‘true agent’ (essentially, one which takes on no risk in relation to the products or services it sells for its principal), then the principal is free to set the price and other terms and conditions on which the agent deals, so a restriction on discounting would not be a concern. The case must therefore involve other issues, but it serves as a reminder that agency relationships in the EU must be very carefully handled from a competition law point of view.
Another Information Exchange Case in the UK
On 16 August 2012, the OFT announced that eight UK National Health Service (NHS) hospitals had given voluntary assurances to the OFT that they will no longer exchange commercially sensitive information about their prices for providing private treatments. NHS hospitals are public bodies which do not charge for NHS treatment, but they may also provide treatment to private patients which is paid for either directly by the patient or by his health insurer.
The assurances are intended to ensure that the hospitals comply with EU and UK competition law. No details are available beyond the fact that the information concerned prices, but, in particular, the exchange of information on companies’ individualised intentions concerning future conduct regarding prices (or quantities of production) is particularly likely to lead to a competition law concern and is effectively seen as a cartel.
Although no fine has been imposed and technically the OFT has found no infringement of competition law, this is another example of the risks arising out of exchange of commercially sensitive information under EU and UK competition law and the need for suitable compliance training.
Be Careful When Using Tying Agreements
Under EU competition law, tying can raise concerns under the general ban on anti-competitive agreements in the EU (Article 101 of the Treaty on the Functioning of the European Union (TFEU)), as well as under the ban on abuse of a dominant position in the EU (Article 102 of the TFEU). A company therefore does not have to be dominant before it runs into concerns.
A case being investigated by the EC illustrates the issues. The EC’s investigation focuses on the practice of Rio Tinto Alcan of contractually tying the licensees of its AP aluminium smelting technology to the purchase of aluminium smelter equipment (specifically, pot tending assemblies, or PTAs) supplied by its subsidiary ECL SASU. The EC has indicated that this may result in an infringement of Articles 101 and 102, with the dominant position relevant to Article 102 being held by Rio Tinto Alcan in the market for the licensing of aluminium smelting technology.
Rio Tinto Alcan has proposed behavioural commitments to address these concerns, specifically to modify the terms of its future agreements, so that any licensee of the AP aluminium smelting technology will be entitled to purchase from any recommended PTA supplier or from ECL any PTA that meets certain technical specifications.
Additional EU/UK competition law news coverage can be found in our news section.