Belgian Competition Authority imposes €98,000 fine for maximum rebates

By Baptist Vleeshouwers, Hein Hobbelen

02-2019

On 29 January 2019, the Belgian Competition Authority (BCA) imposed a €98,000 fine on HM Products, a wholesale distributor of infrared cabins, for imposing maximum rebates on its retailers.

The BCA found that HM Products only admitted retailers to its distribution network if they accepted to comply with the maximum-rebate policy. In addition, HM Products was found to monitor compliance with the policy throughout the distribution relation and to threaten to rescind the distribution contract in case a retailer granted higher rebates to end-customers. 

The decision raises some important points under Belgian competition law:

  • The decision was adopted as a so-called transaction decision, meaning that HM Products cooperated with the investigation and acknowledged the infringement, in return for a 10% fine reduction. In recent years, the BCA heavily relied on this procedure.
  • The BCA choose only to impose fines on the wholesale distributor, not on the retailers. This is somewhat remarkable as the infringement was labelled an "anticompetitive agreement", which implies the involvement of two or more parties.
  • The BCA found that the infringement covered a period of 8.5 years, but admits that it has no evidence for almost 4 years of that period. It nevertheless calculates the fine taking into account the entire 8.5-year period.

We discuss each of these points below.

Reliance on transaction decisions

HM Products' fine was imposed under the so-called transaction procedure, roughly the Belgian equivalent of the European Commission's settlements. A transaction allows a company which is subject to a BCA investigation to cooperate with the investigation and acknowledge the infringement in return for a 10% fine reduction. A transaction procedure in practice also offers parties an opportunity to sit around the table with the authority and discuss the procedure in a more constructive manner.

In recent years, the BCA heavily relied on transaction decisions. The last "normal" decision on the merits in which the BCA imposed a fine dates back to 2014; since then, the BCA has exclusively relied on the transaction procedure, adopting 7 in total.

One of the reasons why the transaction procedure is so popular may be its timing: in practice, the BCA often first communicates a so-called Statement of Objections (SOs) to the undertakings subject to the investigation. The SO is a formal document in which the BCA lists the alleged competition infringements which it believes the parties have committed. The SO is one of the first steps in the process to impose fines.

An incentive to adopt harsher SOs?

The transaction procedure is usually started only after parties receive the SO. As a result of this sequence of events, the BCA may have an incentive to adopt harsher SOs with a view to nudging parties towards the transaction procedure, which is faster and requires fewer resources from the BCA than a normal procedure. Parties concerned then have the choice to respond to the allegations and defend themselves in a litigious setting, or to sit down and discuss the matter with the BCA. The latter option appears to be more popular.

One further result of the popularity of the transaction procedure is the absence of judicial review. Indeed, under Belgian competition law, transaction decisions are final and cannot be appealed in court. As a result of these practices, there is a lack of judicial control on the BCA's imposition of fines and increasingly little guidance by the Belgian courts as to the application of Belgian competition law.

Focus on the wholesale distributor

The HM Products decision is also noteworthy in that only HM Products and not its retailers are fined. This is remarkable since the fine was imposed for an "anti-competitive agreement", which implies the involvement of two or more parties. The BCA justifies its decision by referring to HM Products' pivotal role in the infringement. According to the BCA, the breach would not have occurred without HM Products' imitative and pressure on the retailers. The fact that retailers complied with the policy and on some occasions supported the pricing discipline does not detract from that. 

Remarkably, the German Bundeskartellamt reaches the same conclusion in a decision of the same date. The Bundeskartellamt imposed a € 13.4 million fine on ZEG, a bicycle wholesaler, for retail price fixing. The Bundeskartellamt explains that ZEG's retailers were not target by the investigation for discretionary reasons due to their secondary role.

Duration of the infringement

Finally, the BCA found that the infringement lasted for 8 years and 6 months but admits that it has no evidence supporting the infringement for two periods totalling almost 3 years and 11 months. The BCA however considers that the nature of the infringement and the fact that parties before and after those periods were largely similar. It therefore finds that the infringement constitutes a "single and continuous" infringement covering the total 8.5 years.

Absence of evidence not a deterrent for authorities

This approach shows that the BCA has considerable flexibility when it comes to proving an infringement. The absence of evidence during large periods within the total duration of an infringement need not deter a competition authority from imposing fines. Of course, due to the lack of judicial control, the question as to whether this approach would have withstood the test of the Belgian courts remains a matter of conjecture.

 

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