Vertical Price Fixing: Caudalie Under Investigation by the Belgian Competition Authority

*** The writing does not, and is not intended to, constitute legal advice by any means***

Feel free to follow my Instagram @hongjunlive

Let's talk about antitrust law. This particular area of law is increasingly affecting the fashion industry. I noted in an earlier post that the Federal Trade Commission (FTC) had filed an administrative complaint targeting P&G's planned acquisition of Billie. With the lawsuit pending, P&G voluntarily terminated the acquisition process while expressing disappointment at the FTC intervention. So, for today, let's take a look at what's happening across the Atlantic. The Belgian Competition Authority (BCA) launched a probe into Caudalie, a French skincare company, regarding Caudalie's alleged practice of forcing its selective distributors to sell above the minimum resale price. If the allegation is true, it would violate the Belgian Code of Economic Law that prohibits agreements or concerted practices "which have as object or effect to appreciably prevent, restrict or distort competition on the relevant Belgian market." See Art. IV.1, §1 CEL. Since the investigation is underway, I do not know what the specific facts are and thus have to wait until the final investigative report is made public. Still, it's worth noting that most member states of the European Union have taken a relatively aggressive stance on potentially anticompetitive behaviors in commerce.

So what would happen if the Department of Justice (DoJ) Antitrust Division conducts an investigation, assuming that similar allegations are raised in the Untied States? Traditionally, vertical minimum price fixing was per se illegal under the Sherman Act because such behavior amounted to a naked restraint of trade. The Act specifically forbids "every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade". See 15 U.S.C. § 1. Vertical price fixing is an agreement between a manufacturer and its distributors to fix the minimum price, so it was heavily condemned in the eyes of the law. However, in 2007, in Leegin Creative Leather Products, Inc. v. PSKS, Inc., the Supreme Court discarded the per se approach and ruled that a vertical price fixing practice would be violative of the Act if its anti-competitive effects outweigh pro-competitive ones, noting that "vertical retail price agreements have either pro-competitive or anti-competitive effects, depending on the circumstances in which they were formed." Leegin Creative Leather Prod., Inc. v. PSKS, Inc., 551 U.S. 877, 879 (2007). Doctrinally speaking, the Court's formulation corresponds to what antitrust lawyers call "rule of reason". Under the rule of reason approach, the Antitrust Division would have to conduct a highly fact-sensitive inquiry to identify potential market effects from the standpoint of competition. Having said this, litigation-wise, since Twombly, the Supreme Court ruled that a complaint must allege "enough facts to state a claim to relief that is plausible (italicized mine) on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). Therefore, the Antitrust Division should discover sufficient facts, when added up, would set out a plausible claim of vertical price fixing.

I took an antitrust law class last year because Professor Hugh Hansen, my IP hero, recommended me that it would equip me with the necessary knowledge to become a more competent IP lawyer. And I trust his advice. So from now on, I will periodically report on what's happening in the antitrust world as well. Of course, in the context of the fashion industry to stay true to what this blog is about! I know this is my first serious attempt at offering a high-level overview of antitrust law, or competition law in Europe. So please do not hesitate to leave a comment. Caudalie has been my go-to brand for lip balms for almost a decade now, so I have developed a personal attachment to this brand over the years. Let's see what would come out of the BCA investigation. Perhaps, Caudalie itself might be in need of a makeover.