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25 November 2003
As a general rule, German competition law prohibits retail price maintenance. Accordingly, a franchisor may not dictate to its franchisees the prices at which they must sell franchised goods to their customers (Section 14 of the Anti-cartel Act). Section 14 of the Anti-cartel Act protects the freedom of independent franchisees to set prices themselves. German competition law also prohibits franchisors from recommending to franchisees prices at which franchised goods should be sold to third parties (Section 22(1)(2) of the Anti-cartel Act).
Price recommendations (eg, in franchise systems) are permitted in the case of branded goods. According to Section 23 of the Anti-cartel Act, non-binding price recommendations for branded goods which are in competition with similar goods of other manufacturers are admissible, provided - in addition to other conditions which are not dealt with in this update - that they are expressly identified as non-binding recommendations and that no pressure to implement them is exercised.
In a decision of August 8 2003(1) the Federal Cartel Office considered whether and to what extent the entry of sales prices in a centrally administered IT system breached the prohibition against pricing recommendations.
The case reviewed by the Federal Cartel Office concerned a franchise system which continuously sent its franchisees price lists and advertising material. The franchisor also entered sales prices into a centrally administered IT system. The communications of the franchisor normally did not indicate that the prices given were non-binding recommendations.
The Federal Cartel Office left undecided the question of whether the conduct of the franchisor was a direct breach of the price maintenance prohibition (Section 14 of the Anti-cartel Act), as it assumed a breach of the prohibition against price recommendations. The Federal Cartel Office considered that the sending of price lists and advertising material, and the entry of prices in the central IT system, constituted pricing recommendations on the part of the franchisor, and criticized in particular the absence of any statement to the effect that the prices were non-binding recommendations. It decided that it was irrelevant whether the franchisees were in a position, in principle, subsequently to alter the prices entered in the central IT system. The decisive point was that the prices stated were sales prices, and not prices which related only to the internal relationship between franchisor and franchisee. The Federal Cartel Office also found that the intention to influence prices was established.
The common practice of entering sales prices in an IT system centrally administered
by the franchisor, without any reference to their being non-binding, must be
considered questionable in light of this decision. However, final assessment
will depend on the circumstances of each particular case.
For further information on this topic please contact Karsten Metzlaff or Karl Rauser at Nörr Stiefenhofer Lutz by telephone (+49 30 20 94 20 00) or by fax (+49 30 20 94 20 94) or by email (email@example.com or firstname.lastname@example.org).
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