Price-fixing arrangements of any sort, even when carried out with the blessing of the State itself, are illegal in terms of EU law, the Court of Justice of the European Union has recently affirmed. Member states cannot in any way encourage undertakings or associations of undertakings to restrict another undertaking’s ability to set its own prices.
Price restrictions can be imposed in both horizontal and vertical type of agreements. While a cartel between competitors to set prices is often considered as the classic price fixing arrangement, it is also prohibited for companies in a vertical relationship, such as for example a manufacturer and a distributor to enter into price-fixing arrangements. Parties that enter into such retail price maintenance agreements or engage in other practices that prevent or restrict price competition risk substantial fines if they are investigated by a competition authority.
This particular case went a step further in that the CJEU had to decide whether it is permissible for member states themselves to set prices via their national laws or to in any way encourage price fixing by undertakings.
Italian law on the carriage of goods by road provides that charges payable by customers may not be lower than minimum operating costs. Minimum costs are determined by sectoral agreements concluded between haulage associations and associations of customers of transport services.
The Osservatorio sulle Attività di Autotrasporto, a body composed of representatives of the State, haulage associations and associations of customers of transport services, was entrusted with fixing minimum costs in the event that no agreement was concluded. This body adopted a series of tables in order to fix the minimum costs.
An Italian oil company brought an action before an Italian Administrative Court to annul the measures relating to the setting of minimum costs adopted by the Osservatorio. The Italian court in turn filed a preliminary reference to the CJEU requesting guidance as to whether the Italian law under examination is compatible with EU law and in particular with the EU’s competition regime.
The CJEU observed that although the competition treaty articles prohibit agreements between undertakings and do not refer to member states, the latter are nevertheless duty bound to cooperate within the union. Member states cannot therefore enact measures which may render the EU competition rules ineffective.
The restriction of prices hinders the benefits accrued from a free market
There is a breach of EU competition rules when a member state requires or encourages the adoption of prohibited agreements, decisions or concerted practices or in any way reinforces their effects, the CJEU affirmed.
The court further noted that the Italian Osservatorio itself is composed for the most part of representatives of professional organisations empowered to act in the exclusive interest of the profession. It must therefore be considered as an association of undertakings. Associations of undertakings just like undertakings themselves are directly subject to the treaty rules of competition which prohibit both direct and indirect price fixing.
The court observed that the fixing of minimum operating costs prevents undertakings from setting tariffs lower than those costs and thus limit market operators’ freedom to determine the price of haulage services. It therefore concluded that the Italian law in question breached EU law because it is capable of restricting competition in the internal market. Such a law could not be justified by the defence brought forward by Italy to the effect that it was thus seeking to attain the legitimate objective of maintaining road safety.
The court concluded that the law in question merely refers to road safety in a general manner, without establishing any link whatsoever between road safety and minimum costs and furthermore goes beyond what is necessary for the improvement of road safety.
The message of the Court of Justice is loud and clear. The restriction of prices hinders the benefits accrued from a free market economy and will not be tolerated even if it takes place with the blessing of the State itself.
mariosa@vellacardona.com
Mariosa Vella Cardona is a freelance legal consultant specialising in European law, competition law, consumer law and intellectual property law.