MAURITIUS COMPETITION AUTHORITY PENALIZES FIRM FOR ENGAGING IN RESALE PRICE MAINTENANCE

By AAT Senior Contributor, Michael-James Currie

In a landmark judgment, the Competition Commission of Mauritius (CCM) recently concluded its first successful prosecution in relation to Resale Price Maintenance (RPM), which is precluded in terms of Section 43 of the Mauritius Competition Act 25 of 2007 (Competition Act).

The CCM held that Panagora Marketing Company Ltd (Panagora) engaged in prohibited vertical practices by imposing a minimum resale price on its downstream dealers and consequently fined Panagora Rs 29 932 132.00 (US$ 849,138.51) on a ‘per contravention’ basis. In this regard, the CMM held that Panagora had engaged in three separate instances of RPM and accordingly the total penalty paid by Pangora was Rs 3 656 473.00, Rs 22 198 549.00 and 4 007 110.00 respectively for each contravention.

The judgment is important as it not only demonstrates the CCM’s increasing enforcement efforts and risk of non-compliance with the Competition Act (this decisions follows on CCM’s recent findings against firms for engaging in abuse of dominance conduct) but has created a particularly strict threshold on firms in relation to what constitutes price maintenance in terms of Mauritius competition law. RPM is a prohibited vertical practice, in which suppliers restrict or prescribe the manner in which customers resell the relevant products or services. Minimum resale price maintenance is prohibited in most jurisdictions. Whether the contravention is a “per se’ contravention (i.e. that there is no rule of reason defence available to a respondent) or whether proving an anti-competitive effect is a necessary requirement to prove a contravention is generally the key difference in the manner in which competition agencies enforce RPM.

In relation to Panagora,  the company was found to have contravened the Competition Act as a result of having affixed the resale price on two of its ‘Chantecler’ branded chicken products (chilled and frozen), without affixing the words ‘recommended price’ next to the stated price.

In addition, Panagora engaged in promotional sales to dealers  utilising a ‘deal sheet’ which contained the following clause “Le fournisseur se reserve le droit d’annuler le tariff promotionnel au cas ou certains produits sont vendus en dessous du prix normal” (the supplier reserves the right to cancel the promotional price in the event that certain products are sold below the normal price).

Importantly, in reaching its determination, the Executive Director held that although foreign case law, particularly Australian, UK and EU legal precedent serves as a useful guideline. The Mauritius Competition Act (in so far as it relates to RPM), differs vastly from its international counter-parts. In this regard, the Competition Act merely requires evidence supporting the contention that there was an object or effect of directly or indirectly establishing a fixed or minimum price or price level to prove a contravention. The Mauritius Competition Act  does not require that the conduct in any way prevented, restricted or distorted competition in the market.

Andreas Stargard, a competition practitioner with Africa boutique firm Primerio Ltd., notes that ‘[a] further important aspect of the CCM’s ruling is that sanction (or threat of a sanction) is not a requirement to prove a contravention of the RPM prohibition. Accordingly, the inquiry did not consider whether the downstream customer retained the discretion to price below the “stated price”.’

The legal precedent created by the CMM’s ruling provides much needed clarity as to how the CMM will evaluate resale price maintenance cases and firms need to be particularly cautious in relation to the terms of engagement with customers who on-sell their products.

 

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