Not all vertical relationships are equal

The Conceptual Distinction: Genuine RPM vs. Imposed Clauses

The “freely agreed” RPM paradigm

The entire architecture of Article 101 TFEU rests on the notion of an agreement — a concurrence of wills between autonomous undertakings. The implicit assumption in every RPM case is that both parties derive some benefit from the arrangement: the supplier gets price discipline downstream, and the distributor gets protected margins (shielded from intra-brand competition). This is the classic “mutual interest” theory that underpins the Commission’s treatment of RPM as a restriction by object — it is presumed anticompetitive precisely because both parties benefit from reducing competition at the expense of consumers.

In a genuine RPM scenario, you would expect to find a cluster of corroborating elements that demonstrate the arrangement is operational and desired by both sides:

• Active monitoring of retail prices by the supplier (or even by distributors reporting on each other — the “policing” dynamic seen in many cartel-adjacent RPM cases),
• Reward mechanisms — better allocation, priority supply, enhanced rebates, cooperative advertising funds tied to price compliance,
• Sanction mechanisms — supply restrictions, margin compression, or termination threats for deviators,
• Communication flows — exchanges about pricing expectations, complaints from competing distributors about a “cheater,” supplier interventions to restore price discipline,
• Evidence that the distributor itself values the arrangement (e.g., distributors complaining to the supplier when a rival distributor undercuts the maintained price).

This is the profile of a true RPM. The case law is full of these patterns — Guess, Bang & Olufsen (before the Danish NCA), the consumer electronics quartet, Coty Germany enforcement actions, and numerous Bundeskartellamt and Autorité de la concurrence decisions.

The fundamentally different situation: clauses imposed by a dominant supplier

Now we should consider the inverse scenario. A dominant or super-dominant supplier — a “must-have” brand or unavoidable trading partner in the sense of the EU case law on abuse of dominance — imposes contractual terms that include resale price stipulations. The distributor signs not because it benefits from the arrangement, but because it has no commercially viable alternative. The clause is the price of access to an indispensable product.

Here, the entire logic shifts:

1. Absence of genuine concurrence of wills. The Bayer/Adalat jurisprudence (C-2/01 P and C-3/01 P) established that Article 101 requires a true meeting of minds. But the Court also set a relatively low bar for finding acquiescence. The critical question is whether acquiescence extracted under economic duress — from a position of dependency — should be treated equivalently to voluntary participation in a price-fixing scheme. There is a strong argument that it should not.

2. The “coercion” dimension. The General Court and Court of Justice have acknowledged that where a party’s participation in an arrangement is the result of pressure or coercion, this may affect both the finding of an agreement and the assessment of liability. In cartel cases, the case law recognizes that coercion is not a defense against a finding of infringement per se (see Dansk Rørindustri, C-189/02 P, and the broader cartel jurisprudence), BUT it is recognized as a mitigating factor in fining. However — and this is crucial — the cartel coercion case law deals with horizontal relationships between competitors, not vertical relationships where a dependent distributor faces a dominant supplier.

3. The Article 102 dimension. If the supplier is dominant, imposing unfair trading conditions — including pricing restrictions — on dependent distributors can itself constitute an abuse of dominant position under Article 102 TFEU. The imposition of RPM by a dominant undertaking could qualify as:

• Unfair trading conditions under Article 102(a)
• A mechanism for limiting markets under Article 102(b)
• Possibly tying or conditional supply arrangements

This creates a paradox that we must highligt: how can the distributor be held co-liable under Article 101 for an arrangement that simultaneously constitutes an abuse by the supplier under Article 102?

The Drawing Line: Indicators That Distinguish the Two Situations

Based on the enforcement precedents and doctrinal analysis, I would argue the following markers differentiate a “naked” clause from an operative RPM:

Indicators of a mere imposed clause (NOT genuine RPM):

• The clause exists in the contract, but the supplier does not monitor actual retail prices — there is no surveillance infrastructure, no price-tracking software, no systematic verification;
• There is no communication between supplier and distributor about actual resale prices after the contract is signed — no calls, no emails, no interventions when prices deviate;
• There is no reward for compliance — no enhanced margins, no preferential treatment, no priority allocation linked to pricing behavior;
• There is no sanction for non-compliance — no supply interruptions, no margin compression, no threats when the distributor sets its own price freely;
• The distributor in practice sets prices freely and the supplier is indifferent to the actual retail price level;
• The clause appears in a standard-form contract imposed uniformly across all distributors, as part of a broader set of terms dictated by a dominant supplier;
• There is evidence of economic dependency — the supplier’s products represent a “must-have” category, and the distributor cannot realistically substitute.

In this scenario, the clause is essentially dead letter — it exists on paper but has no operational reality. It was imposed as part of a broader contractual framework that the distributor accepted under duress, and nobody acts on it.

Indicators of genuine, operational RPM:

• Active monitoring infrastructure
• Two-way communication about prices
• Incentive/sanction mechanisms
• Evidence that both parties benefit from and actively maintain the arrangement
• Distributor complaints about rivals’ non-compliance (the “policing” indicator)
• Actual instances of supplier intervention when prices deviate

Can the Victim Be Held Liable?

This is the most provocative and practically important question. My analysis:

The ”we-do-not-care” position in EU competition law is that a party to a restrictive agreement is liable regardless of whether it was the instigator or the reluctant participant. The Commission has consistently taken this view in the past but it is no longer in this camp.

However, there are strong counter-arguments:

First, at the level of finding an infringement: if the clause is truly dead letter — not monitored, not enforced, not rewarded, not sanctioned — than there is no restriction of competition at all, because competition was not there, in the first place. A contractual clause that has no effect on market conduct is arguably not a restriction “by object” or “by effect.” The Cartes Bancaires judgment (C-67/13 P) reinforced that even “by object” analysis requires examining the legal and economic context. A clause that exists only on paper in a take-it-or-leave-it contract imposed by a dominant firm, with no operational consequences, most likely does not meet this threshold.

Second, at the level of liability allocation: even if an infringement were found, there is a strong case for treating the dependent distributor as a victim rather than a co-perpetrator. The analogy is to the treatment of “coerced” cartel participants, but amplified by the vertical and dependency dimension. The Commission’s own Fining Guidelines recognize coercion as a mitigating circumstance — but arguably, in a case of genuine dominance and dependency, the mitigation should be so complete as to amount to immunity from fines. If victims are treated as co-perpetrators we are in grave economic dystopia, where everybody is guilty because it must be so.

Third, the Article 102 interface: if the same conduct constitutes an abuse of dominant position by the supplier, principles of coherent enforcement should prevent the competition authority from simultaneously treating the victim of that abuse as a co-infringer. This creates an internal contradiction in the enforcement system that, in my view, should be resolved in favor of the dependent party.

Fourth, the concept of economic duress and its interaction with the voluntary nature of an “agreement” under Article 101. There is an argument — not yet fully developed in the case law but doctrinally sound — that where a distributor signs a contract containing RPM-like clauses purely because it has no alternative source of supply, and the clause has no operational reality, the element of “agreement” within the meaning of Article 101 is simply absent. This goes beyond mitigation — it attacks the very finding of an infringement.

So, not all vertical relations are equal, nor guilty and as long as vertical competition itself is rather an ”oxymoron”, to use the term enhanced as motto by my friend Alfonso Lamadrid de Pablo at ”Chillin’ Competition”, vertical restraints should be analysed with caution and mindful of the difference in economic power.