Slovak competition authority accepts commitments as a result of granting rebates and quality certificates only to specific retailers

Background

Following the inspection conducted by the Slovak Competition Authority, the Division of Abuse of Dominant Position and Vertical Agreement (the “Authority”) at the premises of the company HP Inc Slovakia, s.r.o. (the “Company”), the Authority initiated on 11 December 2019 an administrative proceeding in order to investigate certain practices of the Company in its vertical relations that might potentially have restricted competition. The practices consisted in granting of special rebates and quality certificates to specific retailers selling the Company’s original ink and toner cartridges for printing devices, copiers, fax machines or other such devices used for a similar purpose (the "Consumable goods") to public authorities through public tenders.

The Authority's concerns

The Company runs a rebate scheme system based on the partnership agreements with its business partners (retailers) under which it grants specific rebates to the latter provided they meet certain conditions. These retailers typically apply for the rebates when they intend to participate in a public tender for the Consumable goods. Furthermore, the Company also issues quality certificates for the Consumable goods which are usually required by the contracting authority during the tender procedure. The Authority’s preliminary investigation showed that when several retailers were contemplating submitting the bid in such a public tender and therefore asked the Company for a discount on the Consumable goods and their quality certificate, it was always granted/issued only to a particular retailer even if eligibility criteria had been met by other retailers as well.

The discount on the Consumable goods was a determining factor for a retailer to draw up a competitive public tender bid so the retailers without this benefit were not able to submit more favourable (price) offers than the retailer who had received the discount. The same holds for the quality certificates because without them the retailers could not have successfully fulfilled the tender requirements set forth by the contracting authority. This eventually resulted in disadvantaged retailers either failing to take part in the tender or not winning the contract.

The Authority therefore found serious concerns that the Company’s behaviour might have led to market sharing/customer allocation contrary to the national (Slovak) as well EU competition rules.

The Company's commitments

In the course of the administrative proceeding the Company sought to address the Authority's concerns by proposing a set of commitments. The Authority consulted stakeholders to verify whether the proposed commitments would remove the competition concerns identified by the Authority. In light of the outcome of the public consultation, the Company made certain adjustments to its proposed commitments which have been eventually partly modified by the Authority.

The Authority found that the Company's final commitments offer a comprehensive and reasonable solution to the competition concerns it had identified, and therefore in March 2021 made them legally binding. Accordingly, the Authority has not ruled on the infringement of competition rules by the Company and imposed no fine in this regard.

The Company's commitments provide, in particular that:

• the Company will make rebates on the Consumable goods accessible under the same conditions to every retailer that fulfils the requirements set forth in the partnership agreement;
• the Company will not share information with its retailers as to which retailer has applied for and been granted rebate on the Consumable goods;
• the Company will not grant further specific rebates other than those received by the retailer on the Consumable goods under the partnership agreement in connection with a particular public tender; this shall not affect the Company’s right to apply general rebate schemes unrelated to the given public tender for the Consumable goods;
• the Company will always issue and deliver a quality certificate for the Consumable goods in a reasonable time if requested by the retailer in order for the latter to meet the public tender conditions.

The commitments will remain in force for five (5) years and monitoring their implementation will be secured by the Company providing the Authority twice a year with a report on compliance with the commitments.