BCA fined Caudalie for imposing minimum prices & restricting sales

On 6 May 2021, the Competition College of the Belgian Competition Authority (BCA) imposed a fine of 859.310 EUR on Caudalie for (i) imposing in the context of its selective distribution system resale prices on its distributors (which are pharmacies) and (ii) for restricting online sales to end-users in other EU Member States.

The decision was triggered by complaints of pharmacies, New Pharma and Pharmasimple, and involved dawn raids in 2018 at Caudalie’s premises in Belgium and in France (with the assistance of the French Competition Authority).

As regards the minimum resale price maintenance, the BCA found that while Caudalie's distribution contracts merely recommend prices (which is in principle permitted), Caudalie exerted pressure on its distributors to follow its recommendations (which is not permitted) as follows:

• Caudalie prohibited the display of labels on the front of its products and posters that contain words such as "discount", "slashed prices", "reduced prices" or "x% discount". While the BCA appeared at first instance to be willing to accept such prohibition as a qualitative condition in the context of a selective distribution network, it noted that such prohibition in practice served to enforce a minimum resale price. The BCA referred in this respect to its 2019 settlement decision with the Belgian Association of Pharmacists reiterating the principle that an (absolute) prohibition to communicate discounts in practice equals a prohibition to grant discounts.
• Caudalie’s sales representatives frequently monitored pharmacies to ensure that discounts stayed within ‘acceptable’ ranges.
• There was a whistleblowing system between the pharmacies put in place.
• Pharmacies that did not comply were threatened with losing their status as selective distributors in the network, depriving them of the possibility to resell Caudalie products.

The restriction of online sales (which is considered a prohibition of passive sales in breach of competition law) did not appear explicitly from the contract either. The BCA established this restriction on the basis of (i) a number of internal emails as well as emails between Caudalie and pharmacies and (ii) internal instructions in which it is indicated that pharmacies would only be allowed to deliver in the country where their respective websites are located, unless agreed otherwise by Caudalie.

Caudalie objected to the use by the BCA of certain evidence. More specifically, Caudalie objected to the use of a recording of a phone conversation between Caudalie and New Pharma that was made by New Pharma (without Caudalie’s consent). Caudalie argued in this respect that such use infringed its right of privacy as well as its right of defence, claiming it to constitute an entrapment. These arguments were rejected by the BCA’s Competition College mainly on the basis (i) that it was not the BCA that had made the recording but New Pharma, (ii) that under Belgian law New Pharma was allowed to make this recording as it was a participant of these calls as well, (iii) that the telecoms law did not prohibit recordings of phone calls in the context of an investigation and (iv) that the content of the conversations was of a purely professional nature.

On the substance, Caudalie (unsuccessfully) invoked various arguments (its limited market share, the need to consider the economic and legal context before finding a resale price maintenance as a by-object restriction, etc.). Worth noting is Caudalie’s argument that it could not be held responsible for de facto fixed or minimum resale price maintenance in a context where the BCA had previously found that the Belgian Pharmacists Order had already limited pricing competition on parapharmaceuticals (more specifically, limited the advertising of discounts but not the use of discounts itself). The Competition College rejected this argument referring to the principle Nemo auditur propriam turpitudinem allegans (ie 'two wrongs do not make a right’).

The BCA’s decision clearly shows its continued practice of establishing an infringement on the basis of a bundle of converging pieces of evidence that in themselves may not be problematic but that, viewed as a whole, indicate a strategy to infringe competition law. Indeed, even providing an alternative, acceptable explanation for each individual piece of evidence did not suffice for Caudalie to prove its innocence. Companies would do well to take this relatively low standard of proof into consideration and ensure that there can be no misunderstanding (i) in their contracts or correspondence with suppliers, customers or competitors but also (i) in their internal presentations, e-mails, messages, etc.

It is in this respect in particular advisable in the context of recommended resale prices to explicitly confirm that customers can deviate without being sanctioned or without losing out on rewards, ie ‘no carrot, no stick’ (which is incidentally one of the commitments offered to the Competition College by Caudalie and which was taken into account as a mitigating circumstance for the calculation of the fine). It is equally advisable to explicitly indicate that any sales restrictions regarding the territory or customer group do not concern passive sales (including online sales).

Update 8 December 2021: On 1 December 2021, the Market Court annulled the BCA’s decision. The Market Court found that the BCA had breached the law by simultaneously (i) accepting the commitments offered by Caudalie and (ii) finding an infringement and imposing a fine. While the Market Court accepted that the finding of an infringement can be accompanied by specific modalities to ensure the infringement is ceased, the Market Court objected to the BCA’s assertion that this implies the possibility to merely accept commitments that were offered by Caudalie for the purpose of getting a commitment decision instead of an infringement decision. The case is now sent back to the BCA.