Resale Price Maintenance (RPM) in Germany
RPM, also referred to as “vertical price fixing”, is prohibited under German law and can only be exempted from the prohibition of anti-competitive agreements in exceptional cases. In major
proceedings in 2016, the German Federal Cartel Office (FCO) imposed fines on 27 food retailers amounting to more than EUR 260 million. Following the food retail case, the FCO published
an extensive Guidance note on the prohibition of RPM in the brick-and-mortar food retail sector in July 2017. As the FCO explicitly states, the Guidance note is applicable to other industries as well. An English version of the Guidance note can be found here. Since then, the FCO has taken actions against RPM measures repeatedly in recent years, which makes the issue as such of high relevance. Today, the FCO regularly intervenes against RPM and follows a very strict enforcement practice. It has continued to impose fines worth millions of Euros against suppliers and manufacturers for interfering with the resale process of their distributors.
Recent cases at the FCO were in particular:
- Ordering and billing systems for the hospitality industry (Ordermann GmbH) : no fine, termination of the proceedings (30/05/2022 – case no.: B7-35/22).
- Consumer electronics (Bose GmbH): EUR 7 million (11/11/2021 – case no.: B10-23/20 previously B1-7/18-2).
- Musical instruments (Yamaha and others): EUR 21 million (3, 24 and 30/09/2020, 18/12/2020, 15/02/2021, 24/06/2021 – case no.: B11-33/19; B11-31/19).
- School bags (Fond Of GmbH): EUR 2 million (16/07/2021 – case no.: B10-26/20 previously B2-130/18).
- Bicycle wholesaler (ZEG): EUR 13.4 million (29/01/2019 (date of press release) – date of decision and case no. unknown – only press release was published).
Further details regarding these cases can be found on the FCO’s website at www.bundeskartellamt.de.
In one of its most recent cases (Orderman GmbH), the FCO addressed the issue of minimum advertised prices and ultimately confirmed its strict standards in relation to RPM. It held that
the minimum advertised prices constituted an indirect restriction by object of the distributors’ possibilities to determine their sales prices and that, as they removed the possibility for retailers to advertise their own sales prices, minimum advertised prices removed a key parameter for price competition between retailers. Therefore, the FCO found that minimum advertised prices were covered by the hardcore restriction pursuant to Article 4 (a) VBER.
The assessment of RPM or vertical price fixing under German law:
The prohibition of anti-competitive agreements in German law covers agreements on vertical price fixing and so-called concerted practices resulting in vertical price fixing. All cases in which
the distributor is restricted in its freedom to set its own resale prices (e.g. retail prices) constitute illegal vertical price fixing or RPM. However, suppliers are generally allowed to set a
maximum resale price, provided that they do not amount to fixed or minimum sales prices as a result of pressure from, or incentives offered by, any of the parties. Vertical price fixing
measures are considered to be restrictions of competition by object. Hence, it is not necessary to examine their effect on the market. This also means that it is presumed to appreciably
distort competition, even if the market shares of the parties to the practice are small.
Under German law, even the unilateral attempt of vertical price fixing is prohibited if it happens by threatening other companies and causing disadvantages or promising or granting
advantages to other companies in order to induce them to engage in conduct which is prohibited under competition law. The prohibition also covers unilateral attempts to induce the addressee to agree on fixed prices with a third business.
Price recommendations and campaign pricing, as viewed by the German competition authority:
Suppliers are free to issue non-binding price recommendations, as long as there is no doubt about the non-binding character of the recommendations, and it does not provide distributors
with information which can induce them to not deviate from the recommended price – in particular information on the pricing strategies of their competitors. In the FCO’s investigations of illegal RPM in the food retail sector, all cases in which RPM could be established, concerned price recommendations. In these cases, the differentiation to be made between legal and illegal practices was based on two aspects: The question of whether unilateral or bilateral practices (agreement, concerted practices) are involved, and whether the influence exercised over the retailer’s decisions is to be classified as legal or anti-competitive.
When planning promotional campaigns, suppliers and distributors can have a mutual interest in exchanging information for the sake of efficient production planning. The supply quantities
needed during a campaign are usually much larger than the quantities sold under the normal price. Agreeing on promotion periods ensures an efficient use of production facilities and does
not violate competition law. However, the supplier must not prohibit the distributor from undertaking any further promotional activities at its own expense and at a date chosen by the
Margin effects calculation support, margin guarantees and compensation requests:
Suppliers are allowed to provide support in the calculation of hypothetical margin effects, provided this does not enable the distributor to draw conclusions on the pricing decisions of
competing distributors. If suppliers act within this framework, distributors can follow their recommendation without this constituting an agreement on resale prices or a concerted practice.
Margin guarantees or compensation requests often deviate from the usual risk allocation between suppliers and distributors according to which the distributor determines the resale price autonomously and has to bear the consequences of its price decision, which includes the risk that its margin expectations cannot be realized in the market. Assuming that none of the
companies involved is dominant or has relative market power, this deviation does in principle not violate competition law, but is the result of a free negotiation between supplier and retailer –unless the agreement can be understood as an assurance by the distributor that the resale price will not undercut a certain level.
Data exchange and RPM:
Data regarding sales and resale prices and quantities may not be used to coordinate pricing strategies, either between the distributor and the supplier, or between distributors with the
supplier acting as a mediator, or between suppliers with the distributor acting as a mediator. The provision of data relating to the future (such as a designated promotional price) is therefore subject to strict limitations.