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Vertical agreements involving Resale Price Maintenance

A cartel is a collusive agreement between rival business to eliminate the process of competition, i.e. not to compete against each other to capture sales.

Agreements between a supplier/distributor and its reseller in respect of the selling price of the reseller (resale price) is prohibited. The anti-competitive cooperation restricts competition on resale price to the detriment of consumers. A reseller/retailer must be free to independently set its own price at which it will resell/retail to consumers (resale price).

In this context only non-binding price recommendations (so-called recommended retail prices, RRP) and maximum retail prices (MRP) are admissible.

The Competition Commission investigates and may impose substantial fines on enterprises involved in an RPM agreement. The enforcement of the prohibition (investigation) and the decision making to impose fines is made by the Competition Commission without having recourse to Courts.

Vertical agreement

A vertical agreement is an agreement between enterprises which operate at a different level of the production or distribution chain (e.g. between importer/manufacturer and distributor or manufacturer/distributor and retailer). The term agreement is defined widely under the Competition Act 2007. It can take any form, whether written, oral, or through direct or indirect communication whether or not legally enforceable. The agreement must however be meant to be implemented in Mauritius or in a part of Mauritius.

 

A collusive agreement therefore does not need to be in writing in order to be found in breach of the Section 43 of the Competition Act.

A vertical agreement is collusive and prohibited if it involves the fixing of the resale price. Examples of conduct that may amount to RPM are –

  • Direct establishment of a binding fixed price, minimum price or price level
  • Indirect establishment of fixed price, minimum price or price level
  • Absence of the terms ‘recommended price’ on price labels
  • Price list issued by the supplier to its reseller containing a retail price column without mentioning the terms “recommended.”

A resale price imposed/forced onto a reseller by a distributor will amount to a breach by the distributor.

Genuine Recommendation

A genuine price recommendation made by the supplier/distributor to its reseller is not prohibited provided the recommended price is not-binding on the reseller.

In that respect, the terms ‘recommended price’ must appear on price labels and price lists provided by the distributor.

No exception or exemption to cartel conduct

Unlike other types of restrictive business practices (abuse of monopoly situation, mergers, vertical agreements other than Resale Price maintenance) for which offsetting public benefit may be found, the Competition Act 2007 does not allow the Commission to exempt or otherwise authorize a collusive agreement, on any ground whatsoever.

Any agreement which is found to be collusive under the Competition Act will be void and prohibited under the Act.  The Commission may also give such directions it deems fit and/or impose financial penalties on the enterprise(s) concerned.

Fines

Collusive agreement including RPM agreement is penalised by fines under the Competition Act 2007. The fines imposable on each member of the cartel is 10% of their turnover. If the breach is more than one year then the 10% turnover is multiplied by the number of years during which the collusive agreement existed.

Click here for more information on fines and leniency.

Leniency

There is no leniency for RPM.

However, leniency is available to a collusive horizontal agreement which is facilitated by an RPM agreement.

Protection of informants

Section 51A of the Competition Act 2007 guarantees that the information and the identity of an informer will, at the request of the informer, be treated as confidential between the Commission and the informer.

The Commission therefore encourages anyone with information on a cartel including RPM to come forward and disclose such information to the Commission in full confidence that their identity will not be disclosed and will be kept confidential.

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