Gómez-Acebo & Pombo © Equivalent perfumes Antitrust views Interlaw Seminar Eduardo Gómez de la Cruz

Gómez-Acebo & Pombo © IS A COMPETITION LAW ACTION POSSIBLE UNDER SPANISH LAW? Marketing equivalent perfumes with reference to third party’s brands is an unfair competition practice. Article 3 Spanish Competition Act establishes that the authority is entitled to pursue under Competition Law unfair competition practices which, hindering competition in the market, affect public interest. Is there sufficient public interest?

Gómez-Acebo & Pombo © The following particular rules may be inferred from case law dealing with the concept of public interest under article 3 LDC: – Conduct carried out by a group of companies and being harmful to another group of companies, leading to a risk of market segmentation (RTDC , Exp 405/97; RTDC , Exp 485/00; RTDC , Exp 519/01; RTDC , Exp 521/01; RTDC , Exp 531/02; RTDC , Exp 529/01; RTDC , Exp 590/03,…) – Large number of consumers affected or large number of units or products affected by the conduct (in addition to the above quoted decisions, RCNC , Exp. S/0814/09 and RCNC , Exp. S/0213/10, amongst others) – Great impact of the conduct in mass media (RTDC , Exp. 314/1992); – Significant market share of the infringer (amongst others, RCNC , Exp. S/0028/07 and RCNC , Exp. S/0140/09); – Damage to competitors and/or choice capacity of consumers (amongst others, RTDC , Exp. 557/2003). HOW CASE LAW DEALS WITH PUBLIC INTEREST?

Gómez-Acebo & Pombo © Equivalent perfumes marketers are specific groups of shops (owned shops or franchisees) who, through unfair competition practices, damage, at least, two other groups of agents in the sector: – Those companies owning the imitated brands; and – Those other brands of perfumes which were sold at the particular price segment where the equivalent perfume is being sold and which cannot effectively compete because of the unfair practice carried out. It is clearly a conduct which is not isolated. There are a plurality of agents distorting the market with unfair practices causing harm in the competitive strategies of at least two other differentiated segments RISK OF MARKET SEGMENTATION

Gómez-Acebo & Pombo © Equivalent perfumes groups (currently more than 10 in Spain) are increasingly growing in number of shops: more than 900 in June 2013; more than 1,500 in June More shops within a single group of equivalent perfumes than within any other kind of distribution chains in the sector. Geographic coverage practically national. Presence in almost any region and highly concentrated in high population cities. Portfolio of brands imitated is in any case around 100/150 fragrances for women and 50/60 fragrances for men. Portfolio always include references to top selling perfumes Almost immediate adaptation to market trends; portfolio renewed every 3-6 months. Therefore, conduct affects in a continued manner the whole set of most successful brands. LARGE NUMBER OF CONSUMERS OR PRODUCTS

Gómez-Acebo & Pombo © For this requirement to be met it is not strictly necessary that the conduct is largely advertised. According to judicial precedents (e.g. National Court on 29 January 2003) the requirement should be interpreted in the sense that an assessment needs to be made regarding “degree of impact on population” Such an impact is obvious in the case at hand given the extraordinary growth of the equivalent perfumes system (+61% in shops in 2014). In any case, huge advertising campaigns are being used by equivalent perfumes groups at least in radio advertisement and other advertisement channels. GREAT IMPACT IN MASS MEDIA

Gómez-Acebo & Pombo © Extraordinary growing process. Starting in 2011, they now reach more than 1,500 shops in Spain with significant estimated increase in global revenue in Growing rates suggest that they may reach a significant market share in the near future if the unfair practices which are being carried out are not stopped. SIGNIFICANT MARKET SHARE OF THE INFRINGER

Gómez-Acebo & Pombo © Effects in the market may be measured by expert’s reports. Damage to competitors are visible through the entire chain of value: from the owners of brands to selective distributors; from mass market to premium brands. Distortion of competition caused by the unfair practice also has the ability to affect choice capacity of consumers if innovation in the market is deterred as presumably will happen if the practice is not prevented. EFFECTS IN THE MARKET: DAMAGE TO COMPETITORS AND/OR CHOICE CAPACITY OF CONSUMERS

Gómez-Acebo & Pombo © Main driver still placed at hands of brand owners who may “easily” access private actions. It may be difficult to see direct damage to consumers: they seem to know what they are buying although there are sound reasons to believe that choice will be reduced in the medium/long term. Competition authority has wide discretion powers to decide which cases it should pursue based on its list of priorities. STILL HARDLY TO ESCAPE FROM PRIVATE ENFORCEMENT “Frankly my dear, I don't give a damn” Rhett Butler, Gone with the Wind

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