On 18 January 2023, the Belgian Competition Authority (“BCA”) reimposed a fine of EUR 859,310 on three undertakings of the Caudalie group for imposing retail prices and restricting active and passive sales. The BCA had already adopted a decision establishing the same infringements and imposing an identical fine on the same undertakings two years ago, [1] but the Brussels Court of Appeal (“Market Court”) annulled the BCA’s decision on 1 December 2021 because the latter had accepted and made binding commitments offered by Caudalie while at the same time also imposing a fine, which was found to be in breach of Article IV.52 paragraph 1, section 2 of the Belgian Code of Economic Law (“CEL”).
Overview of the procedure
On 6 May 2021, the BCA imposed a fine of EUR 859,310 on Caudalie Belgium SRL, Caudalie SAS and Caudalie International Holding (together “Caudalie”). The BCA qualified Caudalie’s imposition of minimum prices and the limitation on active and passive sales on Caudalie’s distributors as hardcore restrictions of competition by object under Article IV.1 CEL and Article 101 of the Treaty on the Functioning of the European Union (“TFEU”). The BCA found that these practices constituted a single and continuous infringement in Belgium between the end of 2014 and the beginning of the year 2018.
During the procedure conducted by the BCA, Caudalie offered three sets of commitments to address the BCA’s competition concerns. The BCA decided to accept these commitments and to make them binding on Caudalie; however it also considered that given the serious nature of the infringements, the commitments offered were not enough to conclude that there were no further grounds for action by the BCA. [2] Therefore, the BCA also imposed a fine of EUR 859,310 – referring to the commitments offered as mitigating circumstances to reduce the fine by 5%.
Caudalie brought an appeal against the BCA’s decision before the Market Court and requested the latter to both (1) suspend the execution of the BCA’s decision and (2) annul it on the merits. On 30 June 2021, the Market Court accepted Caudalie’s request for suspension of the execution of the BCA’s decision and suspended Caudalie’s obligation to implement the commitments that were made binding upon it until the Market Court would have delivered its final judgment on the merits of the decision’s annulment.
The market court’s annulment decision
Next to the suspension of the decision’s execution, Caudalie requested the Market Court to annul the BCA’s decision of 6 May 2021 because the BCA had allegedly erred in law when adopting its decision.
First, Caudalie claimed that the decision was illegal because the BCA had cumulatively (1) accepted the commitments that Caudalie offered and made them binding, as well as it had (2) established an infringement and imposed a fine, both under Article IV.52, paragraph 1, section 2 CEL. However, Article IV.52 CEL would not provide a legal basis for cumulating both the imposition of binding commitments and the establishment of an infringement accompanied by a fine.
Moreover, Caudalie claimed that the BCA negated and went beyond the intention of the commitments Caudalie had offered, which were not meant to be accepted and made binding upon Caudalie in the event that the BCA would adopt an infringement decision and impose a fine.
The Market Court ruled that the BCA did indeed illegally impose a fine on Caudalie while simultaneously accepting and making binding the commitments offered by the latter during the investigation. First, the Market Court found that the proposed commitments were formulated for the attention of the BCA’s College specifically to avoid a decision on the merits establishing an infringement by Caudalie. Second, the Market Court confirmed Caudalie’s view that Article IV.52, paragraph 1, section 2 CEL does not provide any legal basis for accepting commitments offered by a party for the purpose of convincing the BCA that there are no further grounds for the BCA to take action.
The Market Court therefore annulled the BCA’s decision of 6 May 2021. Following Article IV.90 CEL, the case was referred to the BCA’s College – although this time composed differently compared to when the first infringement decision had been adopted.
The BCA’s new decision of 18 january 2023
In its newly adopted decision, the BCA’s College confirmed that Caudalie infringed Articles IV.1 CEL and 101 TFEU by imposing minimum retail prices and active and passive sales restrictions on its selective distributors and reimposed the same fine of EUR 859,310, without further commitments this time.
The BCA found that Caudalie’s practices are so-called hardcore restrictions that cannot benefit from an exemption under Articles IV.1, paragraph 3 CEL or 101, paragraph 3 TFEU and constituted a single and continuous infringement between 2015 and 2018. [3]
In light of the seriousness of the infringement established on Caudalie’s part, it may seem surprising that the amount of the fine is not higher. This is due to the fact that the fine was calculated based on the old rule providing for a maximum cap of the fine’s amount to 10% of the company’s Belgian turnover. Since 2020, the BCA can now impose fines up to 10% of the company’s worldwide turnover. The amount of EUR 859,310 corresponds to the maximum cap of 10% of Caudalie’s turnover in Belgium.
New rules applicable to distribution agreements
On 10 May 2022, the European Commission adopted its new Vertical Block Exemption Regulation (“VBER”) as well as the accompanying Vertical Guidelines. These rules apply to distribution agreements such as the contracts concluded between Caudalie and its selective distributors. The rules provide that certain vertical agreements containing vertical restrictions are exempted from the general prohibition of anticompetitive agreements contained in Articles IV.1 CEL and 101 TFEU, provided certain conditions are met. One of these conditions is that the agreement cannot contain so-called hardcore restrictions, which include, for example, the fixing of retail prices or restrictions on active and passive sales.
Even if the new VBER and Vertical Guidelines are not applicable ratione temporis to the facts underlying the Caudalie case described above, these new rules confirm that fixing resale prices is a serious restriction of competition: paragraph 187 of the Vertical Guidelines states that the practices described in the BCA’s Caudalie decision do amount to indirect means of imposing a minimum resale price. Moreover, concerning restrictions of active and passive sales, the new rules equally confirm that in a selective distribution system, the restriction of sales by selective distributors to final consumers and/or to other authorised distributors are hardcore restrictions.
[1] BCA decision of 6 May 2021, Case CONC-PK-17/0038 and CONC-PK-18/0001, Newmpharma and Pharmasimple / Caudalie, [add link to previous Altius ILO article].
[2] In accordance with Article 52, paragraph 1, section 7 CEL.
[3] In its first decision of 6 May 2021, the BCA retained a longer duration. However, this did not have an effect on the amount of the fine, which corresponds to the maximal cap of 10% of Caudalies’ turnover.
Written by
Carmen Verdonck
Partner
