The Polish Competition Authority’s probe into the luxury watch sector led to a first round of fines this week – two distributors of branded watches were fined the equivalent of ca. EUR 275,000, for fixing with their downstream retailers minimum retail prices for the sale of watches.

PHU Jubiler and Anyro&Co retail and wholesale watches bearing brands including Hugo Boss, Tommy Hilfiger, Citizen, Fossil, Adidas and Emporio Armani.  In December 2012, the Polish Competition Authority (UOKiK) initiated investigations into the business practices of the two distributors.  On the evidence collected, the UOKiK concluded that the two distributors had engaged in price fixing.  In particular, it found that they had:

  • imposed maximum discounts on their trading partners, effectively fixing minimum retail prices;
  • established an enforcement mechanism that included threat of imposing less advantageous business terms in case of non-compliance ( e.g., through margin squeeze and imposing cash-only payment conditions);
  • established a system to monitor their contractors’ prices; and
  • supervised their contractors’ conduct, to avoid behaviour that was out of line with the imposed terms.

The evidence on the UOKiK’s file included incriminating e-mails such as the following:

Unfortunately, our new and beloved homeland (EU) prohibits price fixing and formally we mustn’t write such e-mails. (I hope, however, that in this case no institution will challenge it and we won’t pay a huge fine, which would virtually be possible) (…), sent by a board member.

In addition, the UOKiK found that PHU Jubiler and Anyro&Co were well aware of the illegal nature of their agreements, and had taken steps to conceal their unlawful practices (e.g., limiting e-mail exchanges regarding the agreements and communicating in person instead).

The decision of the Polish Competition Authority highlights yet again the risk in engaging in minimum resale price maintenance.  Also, with proceedings concerning  the Swatch Group (Polska) still on-going, other heavy fines may still be expected to follow.