The National Commission for Markets and Competition (CNMC) has just fined I.C.O.N. EUROPE, S.L. (ICON) for RPM and adopting strategies that eliminate intra-brand competition. The matter stems from a complaint by an undisclosed entity.
Pursuant to the CNMC Decision, ICON implemented a comprehensive price control strategy at two levels of the distribution chain:
- At the wholesale level, ICON granted each of its wholesalers, CÓDIGO ÉTICA S.L. in the Canary Islands and HAIR MASTERY PROFESSIONAL, S.L. distribution rights subject to an obligation to resale prices set by ICON., expressly prohibiting the application of prices lower than those stipulated by the brand. This practice continued uninterrupted from January 2010 to January 2024.
- At the retail segment, ICON designed a nationwide strategy focused on monitoring retail prices and restricting sales through electronic channels. ICON systematically distributed lists of retail prices which, far from being mere recommendations, were mandatory, a practice that the CNMC classified as illegal between September 2017 and May 2023. ICON implemented control systems to tightly monitor the application of prices, discounts and promotional campaigns by its distributors. This control, which ICON’s own employees referred to as “police patrols”, consisted of reviewing websites to detect deviations from the commercial policy. ICON also threatened retaliatory measures, namely the cessation of supply, against distributors who did not comply with the rules established by ICON on the online marketing of products. Likewise, ICON’s own distributors informed ICON of other distributors’ deviations.
- In addition, ICON imposed a ban on marketing of its products on Amazon, whereas ICON itself operated on this platform covertly, through the company Transparency Quality S.L., concealing this link from both its commercial network and the CNMC inspectors during the inspection.
The Decision includes some references to WhatsApp communications between ICON and its distributors which indicate poor company compliance policies including invitations to lie to the CNMC in its investigation and wild and express references to enforce and monitor RPM.
The CNMC characterizes the restrictions as ‘by object’ infringements of Article 101 TFEU and 1 Competition Act. In this specific case, the CNMC determined that ICON’s conduct was intrinsically aimed at eliminating intra-brand competition. The nature of the terms imposed by ICON, RPM including prohibition of retail discounts or promotions, all of them responding to the same anti-competitive objective of “preventing a downward price war” and maintaining artificially high and uniform price levels.
The CNMC’s ruling addresses the issue of changing law which also changed the characterization of RPM as a very serious and ‘not so very serious conduct under the prior Competition Act. The CNMC hence divided the conduct between the period 2010/2017 – 2021 (‘serious’) and period 2021 – 2024 (very serious infringements under the current legal framework). This impacts quantification of the fine but also statute of limitations.
Although ICON claimed to have a small market share, the CNMC determined that the infringement committed by ICON is sufficiently harmful to competition to be considered a restriction of competition by object, regardless of the effects.
The total amount of the fines amounts to €1,197,907. Some colourful aspects which have not played in ICON’s favour include that ICON attempted to align the responses of its distributors to the CNMC information requests in order to simulate that the prices were merely recommended. The infringement in the wholesale market encompasses a fine of €637,907; the infringement in the retail market (online): €560,000.
Another measure imposed on ICON by the CNMC has been the prohibition to contract with the Public Administration in relation to the supply of hair products for a period of five months.
The ICON resolution reaffirms the CNMC’s tough position against RPM. The specific case stands out for the elaborate digital methods used by ICON for monitoring and the creation of mutual control networks between distributors to ensure an artificially high-priced market. It is also important to note that the CNMC does not consider that a low market share exempts from liability; and that concealment strategies aggravate the conduct.
Pedro Callol, Luis Ramírez, Callol, Coca & Asociados
Article published by Callol, Coca & Assoiates
