PRICE FIXING BETWEEN COSMETIC MANUFACTURERS AND THEIR DISTRIBUTORS PREVENTED CONSUMERS FROM GETTING CHEAPER PRODUCTS
The Competition Council found that Oda LT and six companies distributing its skin care products agreed not to sell Oda LT products to consumers at prices lower than those indicated by the manufacturer. For the anticompetitive agreement, fines totalling 217,280 Euros were imposed on the companies Oda LT, Garbanė, GSS Baltic, Permanent Makeup of Baltics, Efektas and Elektroninė parduotuvė. The company Korola, which reported the violation of the Law on Competition, was exempted from the fine.
During the investigation, the experts of the Authority found that certain cooperation agreements between Oda LT and its distributors included a commitment for the distributors not to sell Oda LT products to consumers at prices lower than those specified by the manufacturer and not to apply any discounts. This agreement was also confirmed through internal electronic communication and correspondence between the employees of the skincare product manufacturer and the representatives of the distributors.
Oda LT employees not only sent price lists to distributors with retail prices they should adhere to but also monitored sales prices and sought to ensure that the companies distributing skincare products would comply with the specified prices and refrain from applying any independent discounts or promotions for Oda LT products (language not edited): "<...> According to the cooperation agreement, ODA cosmetologists and other distributors of ODA products cannot independently reduce the selling price. Kindly refrain from applying additional discounts to ODA products. <...> Your recent sales strategy contradicts our cooperation agreements. Once again, we kindly request that you do not apply additional discounts to ODA products and remove the discount code for our products."
"<...> As soon as we received your letter, we have corrected the campaign, so the discount for Oda products is no longer displayed. I apologise for the misunderstanding," replied one of the distributors.
Representatives of the cosmetics distributors themselves also monitored whether their competitors complied with the agreed prices in their e-stores and other distribution channels and informed Oda LT staff, who warned distributors not complying with the agreement by email of their obligation not to reduce final prices to consumers on their own. Oda LT representatives justified the sending of such e-mails to distributors based on their business strategy: “<...> We have a common strategy that cosmetologists cannot undercut our products as if they were selling them in a market “.
Oda LT took additional measures to maintain such an agreement: they set less favourable cooperation conditions for distributors applying discounts to Oda LT products, sought to terminate cooperation agreements with those who inconsistently adhered to the manufacturer's specified prices, consulted with legal experts on how to limit distributors' ability to deviate from the prices. According to the Competition Council's data, cosmetic products marked with the ODA brand were sold at the prices set by the manufacturer in the following e-commerce platforms: klipshop.lt, topbeauty.lt, garbane.lt, efektas.com, inbeauty.lt, and elvaistine.lt, as well as at the Long-Term Beauty Clinic.
"The participants of the agreement had a clear goal – to prevent distributors of Oda LT products from independently setting prices, thus avoiding competition among themselves and not offering consumers lower prices and discounts," said Jolanta Ivanauskienė, Chairwoman of the Competition Council.
The European Commission, when investigating similar infringements, has emphasised that maintaining resale prices constitutes a severe interference with competition, which is regarded as a very serious breach of competition rules.
Considering the income of the companies, the seriousness and duration of the infringement, the Competition Council imposed the following fines on the violators: Oda LT – 163,020 Euros, GSS Baltic – 19,990 Euros, Garbanė – 14,500 Euros, Elektroninė parduotuvė – 11,550 Euros, Permanent Makeup of Baltics – 6,440 Euros, Efektas – 1,780 Euros.
Korola was exempted from the fine because they were the first to report the forbidden agreement to the Competition Council and provided evidence. According to the Leniency Program, a participant in an anticompetitive agreement can avoid financial sanctions if they are the first to report the violation to the Competition Council, cooperate with the Authority, and provide all available information.
The decision may be appealed to the Vilnius Regional Administrative Court within one month from the date of its publication on the Competition Council's website.
