FAST Hungary Kereskedelmi Kft. and FAST ČR a.s. (VJ/41/2018)

1. CASE SUMMARY

A. Summary of facts

FAST Hungary Kereskedelmi Kft. and its Czech parent company, FAST ČR a.s., distribute Casio watches and musical instruments in Hungary and are important suppliers of these products on the Hungarian market.

Between November 2011 and November 2018, the companies imposed minimum online resale prices for the Casio watches and keyboard instruments that they distributed. They provided retailers with lists of purportedly recommended consumer prices. However, retailers’ compliance with these prices was monitored continuously, and online retailers that deviated from them were immediately warned.

Retailers were not permitted to organise promotional campaigns or offer discounts without the companies’ approval. Most warnings were issued verbally or by telephone and therefore left no written record.

B. Legal analysis

B.1. - Framework of analysis

Manufacturers and wholesalers may recommend consumer prices for the products they distribute. However, retailers must remain free to determine their own resale prices, including prices below the recommended level. Lower resale prices may increase competition between retailers and benefit consumers.

The Hungarian Competition Authority investigated whether the arrangements between FAST Hungary Kereskedelmi Kft., FAST ČR a.s. and their online retailers restricted competition on the Hungarian markets for watches and musical instruments.

B.2. - Article 101(1) TFEU and Hungarian competition law

The Hungarian Competition Authority found that the purportedly recommended consumer prices were, in practice, fixed or minimum prices for online sales. FAST Hungary Kereskedelmi Kft. monitored retailers’ compliance with these prices and used warnings, incentives and threats to prevent retailers from deviating from them.

During the first part of the infringement period, FAST Hungary Kereskedelmi Kft. permitted discounts of between 5% and 10%. From March 2017 onwards, this possibility was discontinued and retailers were required to apply the recommended prices to online sales.

The Hungarian Competition Authority considered resale price maintenance to be one of the most serious restrictions of competition. It found that the monitoring of retailers’ prices, the prospect and application of sanctions, and the implementation of resale price maintenance across two separate product ranges increased the gravity of the infringement and demonstrated its institutionalised nature.

The Hungarian Competition Authority concluded that the companies had committed a single and continuous infringement of Hungarian and EU competition law.

B.3. - Fine

The Hungarian Competition Authority imposed a joint and several fine of 325 million HUF on FAST Hungary Kereskedelmi Kft. and FAST ČR a.s.

When determining the fine, the Hungarian Competition Authority took into account the serious nature of resale price maintenance and the fact that the companies were aware that their conduct was unlawful. It also took account of the companies’ cooperation during the proceedings. In particular, the companies admitted the infringement, waived their right to seek judicial review and undertook to implement a compliance programme intended to prevent similar infringements in the future.

2. QUOTES

"In view of this, the recommended retail prices established by FAST Hungary Kereskedelmi Kft. were, in reality, fixed or minimum prices for online sales as a result of the warnings, incentives and threats used by the company. FAST Hungary Kereskedelmi Kft. permitted discounts of between 5% and 10% during the first part of the period under review. However, from March 2017 onwards, this possibility was discontinued and the recommended prices had to be applied to online sales." (free translation)

"As regards the gravity of the infringement, account should be taken of the fact that resale price maintenance is one of the most serious restrictions of competition, although it does not constitute a hardcore horizontal cartel in the present case. The prospect and application of sanctions, the monitoring of compliance with the prices and the fact that resale prices were fixed for two separate product ranges are factors that increase the gravity of the infringement and indicate that the infringement was institutionalised." (free translation)

3. RELEVANT LEGISLATION

• Article 101 TFEU
• Hungarian Act LVII of 1996 on the Prohibition of Unfair Trading Practices and Unfair Competition
• Hungarian Government Decree 205/2011 (X. 7.)
• Hungarian Act CL of 2016 on General Public Administration Procedures
• Hungarian Act I of 2017 on the Code of Administrative Litigation

4. PRACTICAL SIGNIFICANCE

The decision confirms that recommended resale prices may infringe Hungarian and EU competition law where a supplier monitors retailers’ compliance and uses warnings, incentives, threats or sanctions to prevent them from determining their online resale prices independently. It also demonstrates that the use of resale price maintenance across different product ranges over an extended period may increase the gravity of the infringement. An undertaking’s cooperation with the Hungarian Competition Authority, including admitting the infringement, waiving judicial review and adopting a compliance programme, may nevertheless be taken into account when determining the fine.