Global menu

Our global pages

Close

Recent tough enforcement of the Italian Competition Authority on buyer power and vertical restrictions

    • Competition, EU and Trade
    • Retail - E-briefings

    06-02-2014

    Introduction

    The Italian Competition Authority (“ICA”) has recently launched several investigations into potentially anti-competitive agreements.  These agreements concern the creation of substantial “buyer power” through the formation of a joint-purchasing group and the restriction of inter-brand and intra-brand competition caused by restrictions contained in vertical agreements.  In all cases, the initiative taken by the ICA is merely a preliminary step in a process which may result in objections being raised at a later stage if sufficient evidence of anti-competitive conduct is found.

    Buyer power investigation in food wholesale distribution

    The first case, an investigation into one of Italy’s largest joint purchasing groups, Centrale Italiana, was launched following the ICA’s market investigation into the Italian food sector.  Centrale Italiana was formed by several large Italian supermarket chains, Coop Italia, Despar Servizi, Gartico and Discoverde and negotiates contracts with suppliers on behalf of its members.  As part of its role, when negotiating agreements on behalf of its members Centrale Italiana would impose terms on the suppliers relating to purchase discounts and trade spending.

    The ICA considered Centrale Italiana to operate as a horizontal agreement between a number of supermarket chains having as its main object the coordination of the negotiations of purchase agreements with suppliers. In the ICA’s opinion, the joint purchasing vehicle provided by Centrale Italiana increases the “buyer power” of the participating supermarkets and this is liable to have negative effects on competition in both the upstream purchasing markets and also the downstream resale/retail markets.

    RPM and other vertical restrictions

    Three other investigations have been launched by the ICA examining vertical agreements. The ICA considered that all of the agreements failed to qualify for the “safe harbour” provided by Block Exemption Regulation No 330/2010 due to the fact that they contain, so-called, hardcore restrictions of competition.

    Power-One

    Following the receipt of an anonymous complaint concerning potential resale price maintenance (“RPM”), the ICA launched an investigation into Power-One Italy, controlled by Swiss Group ABB, one of the world’s largest producers of solar and wind power inverters.  The complaint concerned a letter sent by Power-One to all its distributors, resellers and partners across Italy headed “Minimum Selling Price”.  In the letter,  Power-One required that its distributors, resellers and partners did not sell below Power-One’s set “minimum selling price” and expressly stated that any failure to comply with this requirement would result in the “interruption of the business relationship with Power-One”.

    In the ICA’s view, Power-One’s conduct may potentially have had the effect of restricting intra-brand competition, thus resulting in higher prices for end consumers. As well as this, as Power-One’s competitors also sell their products into the markets using the same distributors and resellers, the RPM may have lead to price collusion between Power-One and those competitors.

    Enervit

    In December 2013, the ICA open an in-depth investigation into Enervit S.p.A. (“Enervit”), a well known Italian manufacturer of sports and nutritional food supplements, for alleged  RPM and customer and market allocation. 

    This investigation was, again, in response to a complaint received directly from a third party and concerns a letter sent by Enervit to the members of its selective distribution network.  In the letter, Enervit sought to restrict its online resellers from granting discounts of more than 20-25% off Enervit’s official list prices to their end customers, and awarded extra discount to those resellers who observed set pricing levels. In the ICA’s view this was an attempt to induce RPM among all online resellers and to also ensure that its online resellers did not undercut its traditional bricks and mortar resellers.  The ICA considers that these restrictions might have had negative effects on intra-brand price competition.

    The ICA is also investigating claims that Enervit’s standard terms and conditions for resellers imposed a ban on its resellers from making sales outside of Italy, preventing them from promoting products to customers outside of Italy and restricted the ability of its resellers to make passive sales. The ICA asserts that such a practice may result in softening of competition between wholesalers. Lastly, the same standard agreements provide a non-compete obligation which is tacitly renewable, and which is considered likely to result in a loss of inter-brand competition.

    Telecom Italia

    The third investigation is an extension of a probe into the mobile telecoms market opened last year to verify whether Telecom Italia, Wind and Vodafone, the major mobile telecoms operators in Italy, were involved in a horizontal agreement aimed at preventing a new operator, Bip Mobile Srl, from entering the market.  More than a year later, the ICA decided to extend the scope of its investigation in order to examine vertical agreements between Telecom Italia and Wind with several highly performing multi-brand dealers.  These agreements offered extra discounts or premiums to the dealers subject to their maintenance of an agreed resale price level as well as of the observance of non-compete obligations.  The ICA considers that such a system might have resulted in softened inter-brand competition at the retail level. Moreover, they might imply collusion between the operators in order to eliminate the possibility for new entrants of setting up a distribution chain, in the end resulting in restricted access to the market.

    Comment

    These cases highlight two important notes of interest. The first is that the ICA is clearly focusing a great deal of attention on agreements that contain RPM clauses and have an adverse impact on inter-brand and / or intra-brand competition. Companies should review their distribution agreements and ensure that they are using legitimate pricing strategies such as setting maximum retail prices or using recommended retail prices.  The second point to note is that the ICA appears to have launched two large, in-depth investigations, on the back of complaints received from third parties forwarding communications they had received from the alleged infringer.  We will keep you informed of the ICA’s decisions in all four of the cases.