The Federal Cartel Office (FCO) has concluded most of its proceedings regarding illegal resale price maintenance in the food retail sector. It imposed fines totalling approximately €152 million on manufacturers and dealers of confectionery, coffee, pet food, beer and body care products. Any reduction of fines (including immunity from fines in certain cases) depended on the degree of cooperation with the FCO and whether the proceeding ended by mutual agreement (ie, a settlement).
Dealers fined
These proceedings were the first in which the FCO fined dealers for vertical resale price maintenance. From a substantive law perspective, vertical resale price maintenance is committed by two offenders: the supplier and the dealer. However, antitrust authorities normally consider dealers to be victims, instead imposing fines on manufacturers that seek to maintain the prices that they have fixed. The FCO recognised that dealers played an active part in the price-fixing mechanism in the food retail sector. It discovered that dealers urgently requested manufacturers to influence other dealers in order to maintain a uniform retail price level. Further, dealers requested and obtained financial compensation for refraining from offering certain special prices.
Explicit violations of competition law
If a manufacturer and a dealer agree on resale prices, the agreement alone already constitutes a regulatory offence. However, a manufacturer has a legitimate need to discuss price policy with its distribution partners. Further, it is not unlawful for a manufacturer to make the case for its pricing concept and try to convince the dealer not to fix prices that it considers too low. However, if the dealer signals that the manufacturer has convinced (or even persuaded) it, such communication can already be deemed a prohibited agreement or concerted practice. The FCO is aware that to enforce such an approach would go beyond the scope of reasonable competition policy. Therefore, it has stated that it penalises only such actions "which constitute a clear restraint of competition and an explicit violation of competition law" (FCO President Mundt in a June 18 2015 press release), and that "the grey zone will be cleared up only in administrative proceedings, if need be" (Mundt in Lebensmittel Zeitung on September 25 2015).
In any event, a line is crossed if a manufacturer:
- threatens not to deliver the goods or to make incomplete delivery to an uncooperative dealer; or
- offers financial incentives.
A dealer that accepts or requests financial incentives must expect to be fined as well.
Cooperation outside leniency programme
The Federal Cartel Office has offered a leniency programme for 15 years. However, this programme applies exclusively to horizontal restraints on competition. It is not applied to vertical restraints, because it is intended to break up cartels, which are normally formed by large groups of businesses, whereas vertical resale price maintenance typically involves only two companies.
In the present case, the FCO expressly denied application of the leniency programme. Nevertheless, it applied some of the elements of the programme, including immunity from fines for key witnesses. This decision is understandable, but the rationale behind its application remains highly opaque, as no criteria for leniency based on cooperation can be derived from the FCO press release or the case reports on its home page.
For further information on this topic please contact Dietmar Rahlmeyer at CMS Hasche Sigle by telephone (+49 211 49 34 0) or email ([email protected]). The CMS Hasche Sigle website can be accessed at www.cms-hs.com.
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