Resale price maintenance of FitFlop branded footwear
Outcome of investigation
Following an investigation, the Competition Authority (Authority) formed the view that Brazil Body Sportswear (BBS), the distributor of FitFlop branded footwear, had infringed competition law by imposing resale price maintenance and a passive sales ban.
BBS subsequently gave commitments to the Authority to address its conduct, which have now been made an order of the High Court. This means if BBS was to breach the commitments, it would be in contempt of court. The order is the first of its kind to be made under a new provision in Irish Competition Law. This provision allows for commitments given to the Authority to be made an order of court.
Outline of case
In September 2011, the Authority received a complaint that BBS had engaged in resale price maintenance (RPM) by various means.
RPM is the term used to describe an agreement between a supplier and its reseller, which generally requires the reseller to sell the goods or services concerned at a minimum price which has been fixed by the supplier. RPM therefore eliminates the possibility of price competition between resellers and means that customers are denied the possibility of shopping around for better value. RPM is regarded as a serious competition law infringement.
In principle, recommended and maximum resale prices do not raise competition concerns. A supplier is generally free to recommend resale prices to retailers. However, fixed or minimum prices, where the supplier ensures that the retailer does not resell below the recommended price level, are anticompetitive. Various means can be used by suppliers to achieve this goal, such as a price monitoring system used to ensure that recommended prices are actually maintained as fixed resale prices. Similarly, making the grant of rebates or bonuses to retailers dependent on their sales at the recommended resale price is also likely to involve a breach of both EU and Irish competition rules.
As part of its investigation, the Authority obtained witness statements from retailers and conducted an unannounced search at BBS’s premises at which documentary and electronic evidence of RPM was seized. The evidence gathered by the Authority indicated that BBS had enforced these provisions through the monitoring of websites and email correspondence and oral communications with retailers. The Authority also gathered evidence which indicated that BBS also implemented a passive sales ban with respect to the FitFlop brand of footware. Simply put, passive sales bans prevent distributors from selling to customers who have made unsolicited requests for goods
During the investigation, the Authority formed the view that BBS had infringed competition law by engaging in RPM and by implementing a passive sales ban. Both these restrictions of retailers’ freedom to trade are considered hardcore infringements of competition law.
BBS subsequently gave commitments to the Authority which have now been made an order of the High Court. This means if BBS was to breach the terms of the agreement, it would be in contempt of court.
To learn more on this case read our FitFlops Enforcement Decision of the Competition Authority (Case COM/11/07).
