Italian Competition Authority confirms its approach to RPM in a recent investigation into a manufacturer of products sold in pharmacies (probiotics)
In May 2021, the Italian Competition Authority (AGCM or ICA) launched an investigation into restrictions on resale prices that a pharmaceutical company, SOFAR, was alleged to have imposed upon its distribution network for a probiotic product (Enterolactis Plus). In Europe, agreements or anomalous inducements between suppliers and distributors aimed at restricting the freedom of the latter to set their own resale prices (known as Resale Price Maintenance or “RPM”) constitute “hardcore” infringement of Article 101 of the Treaty on the Functioning of the European Union (or “TFEU”) and the national equivalent, which prohibits anti-competitive agreements and concerted practices.[1]
Notably, the investigation was prompted by a complaint submitted to the ICA by a pharmacy owner.
On January 6, 2022, the ICA closed the proceedings without finding any infringement of competition law in light of commitments from SOFAR that would remove the concerns over competition.
The commitments undertaken by SOFAR
To end the investigation without a finding of infringement, the company undertook to send pharmacies and other retailers a memo reaffirming their right to determine resale prices freely on any sales channel. SOFAR also committed to abstain from exerting any direct pressure (e.g., contacting dealers to raise prices or interrupt supplies) or indirect pressure (e.g., offering discounts or promotions linked to implementing recommended prices) on retailers to induce them to comply with the price list. Furthermore, SOFAR will also make clear to its agents that retailers can set their prices freely, and it will refrain from offering incentives (e.g., commission bonuses) to agents to pressure retailers to use certain prices.
These measures will remain in effect for an indefinite period.
Main takeaways
This is an important precedent, as it shows how seriously the ICA takes complaints about RPM practices from individual undertakings, including small businesses and pharmacies, if properly circumstantiated. The same may occur in the case of complaints from manufacturers/suppliers against competitors that engage in RPM. On the one hand, the ICA made clear that it will not tolerate outright infringement of the prohibition against RPM (including outside-contract pressure on retailers not to sell below certain prices or offer discounts above certain percentages). On the other hand, by closing the probe without levying fines or finding any infringement in exchange for legally binding commitments (that seem effectively to eliminate the risk of future RPM conduct), the ICA is applying a more lenient approach to RPM than the approach recently applied by the European Commission (see here)—an approach that would seem to be more in line with the “hardcore” nature of the infringement. The ICA’s “softer” approach may not last, however, as it has stated that market players must fully educate themselves about the fact that such conduct is a “hardcore” breach of competition law.
Relatedly, a review of the EU legislative framework on “vertical agreements” (i.e., agreements between suppliers and buyers/distributors) is underway, and that review is bound to result in amendments to some of the current rules by the end of 2022 (see our report here). Those amendments will affect the treatment of certain types of RPM conduct in particular cases, but will not change the approach that frames them as “hardcore” restrictions in principle.
[1] See also Article 4 of Regulation (EU) no. 330/2010 of 20 April 2020 on the application of Article 101(3) of the Treaty on the Functioning of the European Union to categories of vertical agreements and concerted practices.
