Luxembourg Competition Council undertaking sector inquiry into distribution networks in the retail market

Following complaints by the Luxembourg retail sector and the attention by the European Commission on possible restrictions on the internal market in the retail sector, the Luxembourg Competition Council opened in an inquiry into the distribution networks in the retail market of Luxembourg at the end of 2014. The Competition Council will more particularly assess whether the obligation for Luxembourg retailers to source most fast moving consumer goods from Belgian wholesalers and suppliers is legal from a competition law perspective. The inquiry results, which are expected by the end of 2015, may lead to ex officio actions against any anticompetitive behaviour of suppliers that would be identified.

The inquiry by the Competition Council follows a series of EU-level initiatives regarding the distribution networks in the retail market. In its Green Paper on unfair trading practices in the B2B food and non-food supply chain in the EU, the European Commission identified a number of restrictions to the cross-border supply of goods that could affect competition in the internal market. One particular issue identified holds a significant importance for Luxembourg, i.e., the ability of multi-national suppliers to impose territorial restraints on retailers thereby impeding the latter to source from alternative cross-border suppliers or wholesalers.

In its response (French) to the European Commission's Green Paper, the Luxembourg Con-federation of Commerce ("LCC") highlighted a number of issues in relation to territorial supply restraints; specifically that Luxembourg retailers, when attempting to source from German suppliers or wholesalers, are most often obliged to source from Belgian suppliers. This imposes a pre-determined distribution network for Luxembourg retailers and hinders competition. Furthermore, the LCC underlined that due to the size of Luxembourg, retailers effectively compete not only within Luxembourg, but also with the surrounding countries where retailers can offer consumers lower prices. The LCC emphasised that this is further aggravated by the fact that German TV advertisements caused consumers to look for specific products available in Germany which could not be always be obtained by Luxembourg retailers, due to the latter being redirected to Belgian suppliers or wholesalers. Unable to find the products in Luxembourg, consumers would be further incentivized to look to retailers neighbouring countries instead. The LCC suggested that a procedure, by which a specific sector or retailer could, on an anonymous, basis lodge a complaint with the Competition Council, should be introduced and advised that where, according to EU law, the practices are presumed to the abusive or unfair, a reversal of the burden of proof should be introduced in order to protect the weaker party - that is - the retailer.

The Competition Council subsequently opened an inquiry into the distribution networks in the retail market of Luxembourg in order to gain a full understanding of distribution networks via traditional means as well as through the Internet.

What's next?
The 2011 Competition Act grants the Competition Council the power to carry out such in-quiries into activities of a sector or a company in order to determine whether a breach or restriction of competition law takes place. Where the Competition Council detects activities contrary to competition law, it possesses both administrative as well as fining powers in order to put an end to and sanction anti-competitive behaviour.

With regard to the current sector inquiry, the Competition Council highlighted that the inquiry did not concern a specific case, but rather an assessment of the entire sector, all the while not excluding that the broad inquiry could lead to identifications of individual cases of abuse of dominance or anticompetitive agreements, which would merit a concrete analysis of the individual case and ex officio opening of an investigation.

This is the first such inquiry carried out by the Competition Council since 2005 and the first in the context of the new Competition Act introduced in 2011 and could therefore set a framework for future inquiries. The Competition Council foresees a long-term inquiry finishing at the earliest at the end of 2015.