Antitrust Risk: Three Resale Price Maintenance Cases in Germany in Six Months

October 16, 2009


Yesterday, on 15 October 2009, the German Federal Cartel Office (Bundeskartellamt; FCO) imposed a fine of EUR 4,2 million on Phonak GmbH, a major supplier of hearing aids in Germany, for having illegally restricted the internet trade in hearing aids and having engaged in resale price maintenance. The FCO found that Phonak refused to sell hearing aids to an online retailer that resold the products to consumers below the recommended retail price. The internet seller was thereby forced to increase its resale prices for the Phonak products.

Yesterday's decision marks the third fining decision regarding resale price maintenance by the German authority in just six months. In April, the German watchdog imposed a fine of EUR 9 million on Microsoft for having influenced the resale price of its software package "Office Home & Student 2007" in an anti-competitive manner. The FCO found that employees of Microsoft and a retailer with German-wide activities had agreed on at least two occasions on the resale price of this software package. Last month, in September 2009, CIBA Vision, the market leader in the contact lens business in Germany, was fined EUR 11.5 million for illegally enforcing its "non-binding" price recommendations (unverbindliche Preisempfehlungen).

Each time, the German authority has stated that while it is true that not every contact between supplier and retailer regarding resale prices constitutes an illegal agreement or concerted practice within the meaning of Article 81 EC Treaty and/or the German equivalent, the contact may not lead to a form of coordination where the supplier actively tries to influence the pricing activities of the retailer in a manner that leads to an agreement or understanding of the future actions of the retailer.

The unilateral setting of recommended resale prices (i.e. non-binding price recommendations; RRPs) by a supplier is generally permitted under existing EC and German competition law. The Vertical Block Exemption Regulation No. 2790/1999 expressly exempts the "possibility of the supplier's imposing a maximum sale price or recommending a sale price, provided that they do not amount to a fixed or minimum sale price as a result of pressure from, or incentives offered by [the supplier]" from the general prohibitions of restrictions of competition which are contained in Article 81 and in the almost identical Section 1 of the German Act against Restraints of Competition (GWB). However, if RRPs are enforced using pressure, this indicates that an agreement or concerted practice is in place which may be prohibited under both Article 81 and Section 1 GWB and be subject to fines.

The three decisions by the FCO do not appear to depart from existing case-law, but they do show an increased focus on Resale Price Maintenance in Germany. Consequently, it is recommended that suppliers of goods who use RRP in Germany pay particular attention to this issue. For example, suppliers are not allowed to threaten traders with refusals to supply the respective goods if the traders do not adhere to RRPs or with other boycott measures. Moreover, in the FCO's view any contact beyond the mere communication of an RRP and its emphasis by subsequently and repeatedly addressing the subject — in particular with regard to the trader's pricing behavior — calls into question the non-binding character of the RRP and may be regarded as an unlawful exertion of pressure.