Price war in the cookware industry
Introduction
On December 13, 2023, the Belgian Competition Authority found Le Creuset guilty of engaging in anti-competitive practices. The company imposed a strict pricing policy on its network of independent distributors, exerting pressure to adhere to its ‘recommended’ retail prices. This pressure stemmed from complaints from distributors within the Le Creuset network regarding competition by colleagues with lower prices, which prompted demands for Le Creuset to enforce compliance by all distributors with the Le Creuset recommanded prices.
The violation
Annually, Le Creuset communicated recommended retail and promotional prices, expecting its distributors to adopt and maintain these prices, especially during promotional periods as dictated by Le Creuset, and with only those discounts as desired by Le Creuset. In its ‘selective distribution’ system, adherence to Le Creuset’s commercial policy was a mandatory qualitative criterion, alongside other more common requirements concerning shopfit and product promotion. Distributors were required to have their marketing plans pre-approved by Le Creuset to ensure alignment with the brand’s image.
Through this requirement, Le Creuset ensured adherence to its desired minimum retail prices, contravening Vertical Block Exemption Regulation and Article 101 of the TFEU. Le Creuset monitored its distributors through email, phone calls, and in-store visits, consistently emphasizing the importance of following the recommended resale prices. To enforce these minimum prices, Le Creuset employed several measures:
- Regular checks, including ‘mystery shopping’.
- Pressure to cease deviating from the recommended prices, requiring justification for non-compliance.
- Sharing information about which distributor deviated from the recommended price, including the specifics of when and why.
- Limiting distributors’ ability to run promotions, particularly those with undesirably low prices.
- Rejecting or blocking deliveries to non-compliant distributors.
- Terminating or not renewing contracts with non-compliant distributors.
Restriction by object
Such pressure to respect and effectively implement minimum or recommended prices constitutes a violation of Article 101 of the TFEU and is considered a hard core restriction by object. Consequently, Le Creuset’s distributors were not free to determine their selling prices. Demonstrating the specific anti-competitive effect was, therefore, unnecessary. The fact that Le Creuset acted on complaints from fellow distributors is irrelevant in this context.
Substantial fine
Le Creuset was fined 490,112 EUR, which is the legal maximum of 10% of its annual turnover.
Conclusion
Franchisors must exercise caution in recommending retail prices and in monitoring how franchisees implement these recommendations.
