Belgian Competition Authority Fines Caudalie for Imposing Minimum Resale Prices and Online Sales Restrictions on Its Selective Distributors

On May 6, 2021, the Belgian Competition Authority (BCA) fined Caudalie €859,310 for imposing minimum resale prices on its distributors. The BCA found that Caudalie had fixed the maximum discount that the distributors could offer to customers (as compared to the recommended retail prices) and had prevented the delivery of products to customers in other countries. In line with the case law of the European Courts, the BCA found that these restrictions were not justified by Caudalie’s desire to preserve its luxury brand image.

Caudalie operates a selective distribution network for the sale of cosmetic products. To protect its luxury image, Caudalie included certain restrictive clauses in its distribution agreements. For example, the distributors were prevented from applying labels to the front of the products and from using words such as “discount” or “reduced prices” on posters. In addition, distributors were only permitted to expand sales into other countries with the written consent of Caudalie. In principle, the agreements did allow Caudalie’s distributors to set the retail price of the products; Caudalie provided only a recommended resale price.

The BCA’s investigation revealed, however, that Caudalie had put pressure on its distributors not to apply a discount of more than 5-15% (the exact percentage is confidential) of the recommended resale price. Moreover, Caudalie had monitored compliance with this obligation and sanctioned any distributor awarding a bigger discount. Although Caudalie argued that the sole aim behind these restrictions was to protect its brand image, evidence collected during dawn raids at the offices of Caudalie in Belgium and France showed that Caudalie had gone further than merely ensuring respect for the appropriate qualitative criteria regarding product presentation.

In addition, the investigation showed that Caudalie had prevented online distributors in one EU Member State from selling to consumers in another EU Member State, in order to ensure that the minimum prices were observed in each country. Caudalie’s distribution agreement for online sales included a clause which prevented distributors from delivering products to a country other than the one in which the distributor was located, unless Caudalie agreed otherwise.

Practices which impose minimum prices by determining the maximum level of discounts and which limit cross-border sales within the EU are considered hardcore restrictions under EU competition law. As such, the BCA found that these restrictions are unlikely to be justified by efficiencies. Although the BCA acknowledged that in a selective distribution network the supplier can impose certain conditions to safeguard a product’s image and the quality of the services provided, it held that the imposition of minimum prices cannot be justified by the need to protect the brand image.

The BCA accepted the commitments offered by Caudalie and made them legally binding. Caudalie is therefore required to submit to the BCA a communication intended for its distributors containing the measures Caudalie is permitted to take in order to protect its brand image. Due to the severe nature of the infringements, the BCA also considered it necessary to impose a fine. However, it took the commitments into account as a mitigating circumstance and reduced the fine by 5%.

In the meantime, Caudalie has appealed the decision to the Brussels Court of Appeal.

The full decision is available here (in French).