The Market Court has annulled the Belgian Competition Authority’s decision that imposed a fine of EUR 859,310 on Caudalie for breaching competition law by imposing minimum resale prices and restricting active and passive sales in its selective distribution network. The Belgian Competition Authority will now have to adopt a new decision in this case.
The BCA decision
Following complaints lodged by Newpharma and Pharmasimple, the Belgian Competition Authority (“BCA”) launched an investigation in November 2017, and in February 2018 the Investigation and Prosecution Service carried out dawn raids in Caudalie’s offices in both Belgium and France.
The practices under investigation were Caudalie’s imposition of a minimum resale price on its selective distributors and the limitation of active and passive sales in the online environment for sales by its distributors to customers established in another Member State, as outlined in our article of 25 November 2020.
On 20 November 2020, the Investigation and Prosecution Service of the BCA submitted a motivated proposal for decision to the BCA President regarding the alleged anticompetitive practices.
In an effort to close the investigation without any sanction, Caudalie presented the Competition College with commitments which mainly consisted of a planned communication to its distributors concerning the conditions it can impose on distributors to safeguard the integrity of its distribution network and to protect its brand image and product quality as well as a confirmation that its distributors could determine the resale price of Caudalie’s products themselves.
However, the BCA considered that the infringement in question was established and sufficiently serious to justify imposing a fine.
In its decision of 6 May 2021, the BCA made the aforementioned commitments binding and took them into consideration as mitigating circumstances to reduce the fine to EUR 859, 310 for breaching competition law, as described above.
For more information regarding the BCA’s original decision, please see our article of 11 May 2021.
The Market Court judgment
On 14 June 2021, Caudalie asked for the BCA decision to be suspended and annulled. The Market Court has ordered the suspension of the BCA’s decision on 30 June 2021 to the extent it accepted and made the commitments binding until ruling on substance.
On the merits, the Brussels Market Court considered in its judgment of 1 December 2021 that the BCA had moved Caudalie’s commitments away from their intended purpose. Indeed, the BCA could not substitute Caudalie’s intention with its own. Specifically, the BCA adjusted the commitments’ initial purpose of closing the enquiry without any sanction (Article IV.52, §1, 7° CEL) with modalities constituting mitigating circumstances that can potentially lower the fine (Article IV.52, §1, 2° CEL). As a result, the applied legal basis in the decision concerning these commitments was erroneous and lead to the illegality of the decision.
Comment
The Caudalie case is exceptional as decisions by the BCA involving commitments remain rare. Following this annulment, the BCA must now adopt a new decision. Paradoxically, the imposed fine in that new decision could potentially be higher if Caudalie does not present the commitments concerned as mitigating circumstances. Furthermore, the commitments presented by Caudalie could be transformed into modalities imposed by the BCA to ensure that the infringement is effectively terminated.
It should be noted that the existence of the infringement as such was not contested by Caudalie in the framework of this appeal procedure. Therefore, it will be difficult for Caudalie to rebut it in the new procedure by the BCA. In the future, the BCA will certainly be more cautious when handling such commitments presented by undertakings with the goal of closing an investigation without a sanction.
In this respect, it is worth remembering that the European Commission is currently assessing the rules on vertical agreements contained in the Vertical Block Exemption Regulation which is due to expire on 31 May 2022 – please see our article of 15 July 2021 in this regard. Undertakings that fail to adapt their distribution agreements to the new rules may indeed face increased scrutiny by competition authorities.
Annabelle Lepièce - Partner, Brussels
Sander De Volder - Junior Associate, Brussels
