First judgement concerning Binding Resales Prices dismisses claim

On 23 October 2003 the Eastern Division of the High Court gave full acquittal to Levi Strauss & Co. ("Levi Strauss") in a case where Levi Strauss was charged with resale price maintenance. Attorneys Karen Dyekjær-Hansen and Sture Rygaard were representing Levi Strauss.

The Prosecution Service had claimed a fine of "minimum DKK 600,000.00" for alleged breach of the prohibition against binding resales prices. The prohibition was allegedly breached during a 2-year period from 1998 till 1999. The matter was first reviewed by the Copenhagen City Court, which by a judgement of 18 July 2002 acquitted Levi Strauss in respect of the general charge but found that Levi Strauss in two isolated instances had pressurised two dealers into observing binding resales prices. The City Court assessed this to a fine of DKK 200,000.00.

Both parties appealed the judgement. Levi Strauss with the purpose of getting full acquittal because Levi Strauss finds that in a clear and unambiguous manner its conditions of sale and delivery clearly state that the dealers fix their own prices, and that the company's practice was in keeping with that. The Prosecution Service on the other hand appealed the judgement with the purpose of having the Court sustain the claim that the matter concerned a general violation during the whole period.

The High Court gave acquittal to Levi Strauss on all counts and in respect of the whole period.

The judgement included an assessment of the scope of the competition law prohibition compared with an actual assessment of evidence. As far as the scope of the prohibition is concerned, the Court allowed, in accordance with the arguments of the Defence, that it is legal to provide guidance and advice on prices and that it is illegal to keep discipline in the form of sanctions or threats about sanctions towards dealers selling at prices diverging from the recommended prices, or alternatively to provide incentives for a customer to change its price policy. This is in accordance with the legislation and the guidelines existing in the area.

In respect of the assessment of the specific evidence the Prosecution Service, among other things, attached importance to a television programme recorded with a hidden camera. There was disagreement as to what could be inferred from the programme because the relevant clip was rather short and because it was impossible to procure the raw tape in spite of the requests of the Defence. In the opinion of the Defence, the raw tape would show that there was no breach. The High Court simply disqualified the evidence.

In addition to that, the judgment is particularly interesting because the Prosecution Service emphasised the importance of a survey of the price dispersion of Levi's products carried out by the Competition Authority. The Defence had procured an opinion by two experts appointed by the Dean of the Copenhagen Business School. On the basis of that opinion, the High Court established that the survey had such "shortcomings that only limited importance can be attributed to it in connection with the rendering of a decision in these proceedings".

Irrespective of the limited weight of the survey, the Defence does not find that the survey in any manner confirmed the existence of binding resales prices, but rather disconfirmed such a hypothesis.

All dealers examined before the High Court concurrently stated that they have not been subjected to sanctions and that they fixed their prices independently. The examinations before the City Court also showed that there had been no sanctions. However, one statement remained from a single dealer in a single shopping mall that he had been subjected to pressure, but since this statement was not supported by objective data and had been contradicted by the seller, the High Court found that it had not been substantiated that any illegal conduct had taken place, and added the, in principle, important point of view that even if pressure transcending the barriers to what is legal has been exercised, "threats against one single dealer cannot in the opinion of the High Court in itself be considered sufficient to constitute violation of sec. 6(1) of the Competition Act." As mentioned, this point of view was not decisive to the judgement, but worth noting.

As for the other dealer whose change of price policy contributed to the City Court's decision, the High Court did not find, following the dealer's own statement before the High Court, that Levi's had exercised pressure.

Questions in relation to the judgement and competition law in general may be directed to attorneys Karen Dyekjær-Hansen and Sture Rygaard.