The Swedish Competition Authority Issues Record Fines for Resale Price Maintenance
On 20 December 2023, the Swedish Competition Authority (“SCA”) issued a decision against a manufacturer of kitchen and bathroom faucets and showers for having fixed the prices and terms for the online resale of its products, i.e. resale price maintenance (“RPM”). The fine of MSEK 16.9 (approximately MEUR 1.5) is the highest fine imposed by the SCA since the authority obtained fining powers in March 2021. Furthermore, it is the highest Swedish fine yet for a vertical restraint.
The decision in full is available in Swedish here.
The infringement in brief
The SCA found that Tapwell had implemented a pricing policy where the retail prices of Tapwell products sold online were not allowed to be more than ten percent lower than the recommended prices. Tapwell enforced the policy by sending text messages and emails to retailers who deviated from the policy, indicating that their prices were too low. Furthermore, Tapwell monitored the retailers’ price adjustments through price comparison services such as “Prisjakt”. Tapwell subscribed to Prisjakt’s automatic message service, and once it received a notification that a retailer was implementing a price cut, it forwarded such notification to the retailer in question requesting the retailer to adjust the pricing level.
While there were indications that a number of retailers had adhered to Tapwell’s pricing policy by adjusting their retail prices following instructions from Tapwell, the SCA’s investigation only concerned the measures taken by two of Tapwell’s retailers. In the end, the SCA only fined Tapwell for the infringement.
RPM may constitute a “by object” infringement
The SCA concluded that Tapwell’s RPM was an infringement by object, i.e. the most serious kind of infringement where no effects need to be established. Here, the SCA considered the Court of Justice of the European Union’s recent preliminary ruling in Case C‑211/22, Super Bock, and declared that a by object infringement can only be established after having considered the nature of the terms in the agreement, the objectives that it seeks to attain and all of the factors that characterise the economic and legal context of which it forms part.
According to the SCA, RPM has been considered inherently anti-competitive in previous case law, and is also listed as a hardcore restriction in the Vertical Block Exemption Regulation. Therefore, the SCA concluded that the assessment of RPM agreements in their legal and economic context can be limited to what is strictly necessary to establish that they have an anti-competitive intent.
Yet, the SCA also conducted a further analysis of the economic and legal context of the agreement. This for the sake of completeness. The SCA noted that the RPM concerned online sales. It also assessed Tapwell’s arguments that there were procompetitive effects due to Tapwell’s wish to protect its brand image and prevent online retailers from free-riding in relation to the pre-sale efforts made by other distributors. Even following this analysis, the SCA found that the RPM constituted an infringement by object.
Determining the size of the fine
As the infringement covered the periods 28 August 2019 – 15 February 2021 and 31 October 2018 – 1 February 2021 respectively for the two retailers, the SCA deemed the RPM to constitute a single and continuous infringement between 31 October 2018 and 15 February 2021. Taking into account, inter alia, that RPM is considered a hardcore restriction, that the infringement regarded online sales where price restrictions can have a great and widespread impact, and that the infringement covered Sweden as a whole, the SCA considered the infringement to be serious. However, considering that vertical restraints are typically less harmful to competition than horizontal restraints, that the two retailers accounted for a relatively small portion of Tapwell’s total sales, and that there were no aggravating circumstances, the SCA set the fine to MSEK 16.9 (approximately MEUR 1.5), equalling 2.2 percent of its annual turnover.
Unresolved legal issues in need of an answer
We still lack a clear answer as to how extensive the SCA’s investigations need to be to establish that a vertical restraint is a by-object infringement. The SCA’s decision has been appealed, and the Patent and Market Courts will hopefully provide answers to a number of questions connected to the assessment of RPM. A matter of particular interest is how to handle any procompetitive effects related to RPM, which are recognised by the Commission, in particular considering the free-riding issues which many suppliers face. We will monitor the case and get back with new reports.