DECISION
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Alleged competition problem
ONLY THE SWEDISH VERSION IS AUTHORITATIVE
The Swedish Competition Authority's decision
The Competition Authority will not investigate the matter further.
Matter
Complaint
On 25 September 2013 the Competition Authority received an anonymous tip
claiming that 13:e Protein Import AB (13:e Protein Import) had infringed the
Swedish Competition Act (2008:579), through resale price maintenance in the
form of a minimum resale price list for their online retailers.
Background
13:e Protein Import is a company that manufactures a wide selection of products
under the brand name Self Omninutrition. The selection of products includes
“sport nutrition” products such as protein and/or carbohydrate-based products,
amino acids, creatine and other performance-enhancing products. The company
also offers products for weight control, vitamins, minerals, different herbal
capsules as well as Omega-3 capsules. The total turnover for the company in 2013
was approximately SEK 62m, of which about half referred to the Swedish
operations. The company sells its products through closer to 150 retailers who in
turn sell the products in physical shops or online.
KKV1024, v1.5, 2014-03-10
The complainant claims that 13:e Protein Import in an illegal manner has fixed the
resale prices for their products. The complainant has attached a letter from 13:e
Protein Import to the company's online retailers to its complaint. In the letter, 13:e
Protein Import urges the online retailers to, starting on 30 September 2013, not go
below the lowest price that the company set for the approx. 60 protein powder
products stated in a price list attached to the letter. The price list includes
minimum prices for some products and recommended retail prices for other
products.
Address SE-103 85 Stockholm
Visiting Address Torsgatan 11
Telephone +46 8-700 16 00
Fax +46 8-24 55 43
[email protected]
DECISION
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The Competition Authority held a meeting with 13:e Protein Import in order to
ascertain the company's view of the claims stated in the complaint. The
Competition Authority has furthermore conducted an investigation of the
markets on which the company is present, by obtaining information from the
market analysis company Euromonitor International, the National Food Agency
and the trade association Svensk Egenvård among others, as well as investigated
the retailers’ adherence to 13:e Protein Imports minimum prices.
13:e Protein Import has confirmed that the letter was sent to all of the company's
online retailers. A primary reason for why the letter was sent, according to 13:e
Protein Import, was that the company has observed, in places including the price
comparison website www.prisjakt.nu (Prisjakt), that one of their retailers sold
their products at heavily reduced prices. Some of the company's other retailers
reacted when they discovered this and wondered if 13:e Protein Import has
applied lower wholesale prices for this retailer. The letter was sent out as a
reaction to the retailers’ questions and to ensure that the retailers were able to get
a large enough margin on the company's products. According to 13:e Protein
Import the other retailers could not match the heavily reduced prices, which could
lead to them finding it difficult to continue selling 13:e Protein Import's products.
According to the letter, dated 24 September 2013, the prices were to be adjusted
no later than 30 September 2013, otherwise 13:e Protein Import would take further
measures.
The Competition Authority has investigated the retailers' prices of the different
products online and has found that many of the retailers have adhered to the 13:e
Protein Import minimum price list. Some retailers followed the price list by
lowering or raising their prices. However, in several cases the retailers kept the
previous prices, as they did not fall below the stated lowest prices. For all
observed products, at least one retailer has raised its prices. The greatest
adherence observed took place during the months between October and
December 2013. At the turn of the year 2013/2014 some retailers started setting
prices below the specified lowest prices. 13:e Protein Import's price list specifically
concerns protein powder products.
The sale of sport nutrition products in Sweden is characterised by a number of
sales channels and retailers. Within the protein powders segment, the
Competition Authority has identified more than one hundred different brands
sold by Swedish online retailers. Several manufacturers, like 13:e Protein Import,
produce only one brand, which means that a large number of actors are present
in this product segment. Protein powder products are primarily sold at gym and
exercise facilities, and in specialised sports nutrition and health food stores. The
products are also available in some grocery shops, pharmacies and sports and
leisure stores. Protein powder products are thus available in a great number of
different physical shops. There is also a great number of online retailers selling
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these products, such as internet-based sports nutrition shops, health food shops
and pharmacies. There are more than 35 different online retailers found on
Prisjakt alone, selling the products of 13:e Protein Import. The brand selection
varies between different retailers of protein powder products. Most times, each
retailer will carry close to ten brands; some offer a limited number of brands,
while others have a significantly larger selection.
A significant share of protein powder product sales takes place through vertically
integrated actors of varying size. A number of upstream actors, including two of
the largest manufacturers, Gymgrossisten AB and Life Europe AB, are vertically
integrated with their own sales channels. At least 30 per cent of the protein
powder product market is vertically integrated.
Different protein powder products can to a certain extent be distinguished based
on a number of characteristics. The products are offered in different quantities, a
number of different flavours, with different sources of protein, and with some
smaller variations of other ingredients. Several manufacturers offer a wide range
of protein powder products. Products of the same brand may thus have varying
characteristics.
The regulatory conditions as well as the terms of manufacturing and distribution
are similar for different protein powder products. Protein powder products are
covered by the same regulatory framework as other sports nutrition products.
There are no types of protein powder products to which special manufacturing
requirements apply. The manufacturing and distribution of different sports
nutrition products is also carried out on similar terms. In the upstream segment,
there are actors with in-house production of their own products, as well as actors
that purchase ready-made products from external manufacturers.
Legal basis
Chapter 2, Section 1 of the Swedish Competition Act and Article 101 of the Treaty
of the Functioning of the European Union, prohibit agreements between
undertakings, which have as their object or effect the prevention, restriction or
distortion of competition to an appreciable extent. This applies in particular to
such agreements which entail the direct or indirect fixing of purchase or selling
prices or other terms of trade.
Agreements between manufacturers and retailers that directly or indirectly
restrict the retailer's possibility to set prices under a certain level, i.e. resale price
maintenance, are considered as hardcore restrictions. Such agreements are
excluded from the application of the block exemption for vertical agreements.1 For
1
Refer to Article 4 (a) in Commission Regulation (EU) No 330/2010 of 20 April 2010 on the application of Article
101(3) of the Treaty on the Functioning of the European Union to categories of vertical agreements and concerted
practices and Section 3 § of the Act (2008:581) concerning block exemptions on vertical anti-competitive
agreements.
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such agreements there is a presumption that the agreement falls within the
prohibition of restrictive agreements and that it does not fulfil the conditions for
exemption. However, the companies may, in each individual case, show that the
agreement leads to pro-competitive efficiencies.
Grounds for the decision
The Competition Authority makes an assessment in each case of whether the
reported matter should be investigated further. This assessment is done based on
the Authority’s prioritisation policy. When prioritising matters, the Competition
Authority must weigh the severity of the problem or infringement, the importance
of having a precedent ruling, and whether any other authority or actor is better
suited to take action with regard to the matter at hand. The assessment must also
consider the ability of the Competition Authority to effectively investigate and
prove that an infringement has taken place. The severity of the problem is
assessed primarily in relation to harm to competition and consumers.
The object of assessment in this case is the price list sent by 13:e Protein Import AB
to its online retailers, which contained minimum prices for a number of protein
powder products. The letter accompanying the price list stated that the online
retailers were not allowed to set a price lower than the minimum stated in the
pricelist. During its investigation, the Competition Authority has found that the
retailers adapted their prices to the stated minimums. The Competition Authority
can thereby note that the conduct constitutes resale price maintenance.
Resale price maintenance may harm competition and be detrimental to the
consumers. Such harm can arise in several ways. The assessment depends, among
other factors, on whether the resale price maintenance is exerted by a single
manufacturer or by several manufacturers in parallel.
Resale price maintenance by a single manufacturer can impede effective
competition between retailers. The risk for such harm depends, inter alia, on the
amount of competition between manufactures, i.e. inter-brand competition. The
weaker inter-brand competition is, the greater the possibility for the manufacturer
to maintain a price above a competitive price level. When inter-brand competition
is ample, the possibility of charging a price higher than the competitive price level
is however more limited. If a manufacturer, who is facing strong competition
from other manufacturers, chooses to use resale price maintenance to raise retail
prices above a competitive price level, that manufacturer will see a significant loss
in sales, as many consumers will choose to switch to other alternatives. Such
conduct is not profitable. One significant factor in the assessment of resale price
maintenance from a sole actor is thus to what degree this actor is able to set prices
above the competitive level. The lower the market share, the less likely it is that
resale price maintenance will lead to harm for competition and consumers.
DECISION
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Resale price maintenance can also harm competition and consumers if it is part of
a horizontal cooperation. Such an agreement may be explicit or implicit, and take
place on the manufacturing or retail level (upstream or downstream), or both. The
conditions for horizontal co-ordination depend on the level of market
concentration on the two levels. In the case of fragmented upstream and
downstream levels, the likelihood of horizontal co-ordination is low, and it is thus
unlikely that resale price maintenance is part of such co-ordination. If, however,
conditions for horizontal co-ordination are present, resale price maintenance may
under certain circumstances be harmful to competition and consumers. This is
particularly the case if several manufacturers apply resale price maintenance in
parallel.
13:e Protein Import has a small market share in protein powder products. The
company's market share is below 3 per cent. Based on the circumstances the
investigation has shown thus far, the Competition Authority deems it improbable
that the relevant product market can be defined more narrowly than the market
for protein powder products in Sweden. This is due, among other factors, to the
fact that protein powder products appear to be highly homogenous, and there
appears to be favourable conditions for supply-side substitution within this
category. Within sports nutrition products in general, the company's market share
is even smaller.
There is a large number of manufacturers of protein powder products. The
manufacturing level thus appears to be fragmented. The investigation has not
provided support for the existence of any significant obstacle to enter the market
as a manufacturer of protein powder products.
The retail level also appears to be fragmented. There are several different sales
channels, and a large number of retailers that sell more than one brand of protein
powder products.
In this case, there is no indication of resale price maintenance from other actors.
Against this background and on the basis of the circumstances found in the
investigation so far, the probability of any major harm to competition and
consumers in the present case is not significant enough for the Competition
Authority to prioritise a continued investigation. The Competition Authority
therefore closes the investigation. The decision of the Competition Authority not
to investigate the matter further does not include an assessment of whether the
conduct constitutes a competition law infringement.
Separate action
The decision of the Swedish Competition Authority not to investigate the reported
competition issue further cannot be appealed. This is pursuant to Chapter 7,
Section 1 of the Swedish Competition Act (2008:579).
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The companies affected by the decision may, however, bring an action before a
court at their own initiative, in accordance with Chapter 3, Section 2 of the
Swedish Competition Act. An affected company may be the company that
brought a certain procedure to the attention of the Swedish Competition
Authority, if the company's legal standing is affected by the authority decision or
if the decision will have major consequences for the company.
A separate action for a prohibition of anti-competitive cooperation between
undertakings, in accordance with Chapter 2, Section 1 of the Swedish Competition
Act or Article 101 of the Treaty on the functioning of the European Union, is
brought through a summons application to the Market Court.
_____________________________
This decision was made by Deputy Head of Unit Trine Osen Bergqvist. Case
reported by Corina Wahlin.
Trine Osen Bergqvist
Corina Wahlin
Copy: 13:e Protein Import AB
This decision has also been published on the Swedish Competition Authority website.