Sellers: Don’t force resellers to sell at a minimum price or a particular price. The Coach House Case

Background
The general rule is that resellers may charge whatever price they want when they resell goods which they have bought – in other words, the supplier may not tell the reseller the price at which goods are to be resold. The supplier may recommend a price and may impose a maximum price at which the goods are resold but not impose a minimum price or a specific price.

The rules – known as the rules on "resale price maintenance" (RPM) may be set out as follows:

The issue of RPM became centre stage in a recent Irish competition law case called Coach House.

Facts
In April 2019, the Irish Competition and Consumer Protection Commission (CCPC) opened an investigation into suspected anti-competitive practices by Chairs Limited (which, according to the CCPC, trades under the name “Coach House” in Ireland). Coach House is a wholesale and trade-only supplier of household furniture products and accessories with a warehouse and show room in the UK. It supplies household furniture products to resellers located in Ireland.

Suspected Resale Price Maintenance
The CCPC investigation examined whether there was RPM, contrary to Irish and EU rules on anti-competitive arrangements - section 4 of the Competition Act 2002 (2002 Act) and/or Article 101 of the Treaty on the Functioning of the European Union (TFEU). The investigation covered the period of January 2013 to May 2020. In particular, the CCPC was considering the manner in which Coach House’s then suggested selling prices (SSPs) were applied between March 2013 and May 2020 in the resale of Coach House’s household furniture products in Ireland. In essence, the CCPC was investigating whether the SSPs amounted to RPM.

Outcome of the Investigation
The CCPC said that it found evidence that between March 2013 and August 2017 that Coach House had implemented and enforced its SSPs on certain businesses which were selling furniture products "on line" into Ireland.

The CCPC confirmed Coach House fully co-operated at all times with the CCPC’s investigation. Moreover, Coach House denied that there was a breach of competition law (i.e. a breach of section 4 of the 2002 Act or article 101 of the TFEU). Notwithstanding this denial and perhaps with a view of ending the investigation, on 15 April 2021, Coach House entered into a commitment agreement with the CCPC in which it agreed:

• to give a commitment not to engage in RPM conduct 
• to refrain from imposing or agreeing any terms and conditions that place obligations on its resellers to adhere to Coach House’s suggested, minimum or fixed resale prices for household furniture products
• to refrain from restricting the ability of resellers to independently determine the resale price of household furniture products

In consideration of Coach House's undertakings, the CCPC undertook to "conclude the Investigation and shall refrain from instituting proceedings pursuant to section 14A of the [2002] Act against Coach House in respect of any matter to which the Investigation relates for so long as Coach House remains in compliance with the Agreement and Undertakings."

Recital D of the agreement provided that agreements between undertakings or concerted practices "having as their direct or indirect object the establishment of a fixed or minimum resale price of a fixed or minimum price level to be observed by the buyer ("resale price maintenance", "RPM") constitute conduct prohibited under section 4(1) of the Act and/or Article 101 TFEU". Clause 1 of the agreement defines RPM as meaning "resale price maintenance, namely, agreements or concerted practices having as their direct or indirect object the establishment of a fixed or minimum resale price maintenance". The use of the word "object" and not the phrase "object or effect" is one of the curious features of this definition.

Application by the CCPC to the High Court
The CCPC then sought a High Court order on the matter under section 14B of the 2002 Act. This provision effectively makes the agreement subject to an "order" of the High Court and strengthens the enforcement procedure. Under clause 4 of the agreement, Coach House had consented to the CCPC making the application to the High Court.

High Court Order
On 14 May 2021, the High Court granted an order in the terms of the agreement between the CCPC and Coach House. The High Court order came into force on 29 June 2021, subsequent to a 45-day ‘standstill’ period under section 14B(4). The agreement is now binding for seven years from 29 June 2021. (Seven years seems to be a long time but it is the timeline by which the CCPC now seems to operate (e.g. Ticketmaster)). A breach of the commitments will also be a breach of the High Court order which may result in contempt of Court. The CCPC has stated that the giving of the commitments by Coach House has addressed the CCPC's competition concerns and closed the investigation.

Comment
This case represents another use of the section 14B process by the CCPC. The process has now been used on a number of occasions particularly around the issue of RPM. It will be interesting to see if the process will still be used as much in the post-ECN+ environment and whether there are ways in which the process could be streamlined. For now, however, the section 14B mechanism remains, from the CCPC's perspective, a useful mechanism to bring investigations to an end and to put commitments on a serious footing backed by the sanctions of a breach of a court order.

For more information on this topic please contact Dr Vincent Power, Partner or any member of A&L Goodbody's EU, Competition & Procurement team.

Date published: 9 August 2021