Price fixing by dealers in a purchasing group is prohibited. The Federal Cartel Office published this in a statement published on January 29, 2019 Press release on a fine decision clarified again. There are exceptions to this rule, but only within narrow limits. Read here what is possible under antitrust law.
dr Christian Andrelang, LL.M.
Specialist lawyer for international business law Specialist lawyer for commercial and corporate law
Price fixing – what is it about?
Instructions given by the seller to its dealers, which oblige them to sell the purchased products at a certain fixed price or not below a minimum price, are contrary to antitrust law. Such clauses are not only ineffective and therefore do not have to be followed. They also trigger antitrust proceedings and significant fines. At best, maximum sales prices may be set. However, these must not be set so low that they actually act like a minimum price, because selling the products below the maximum price is not economically interesting for the retailer.
Non-binding price recommendations are also permitted. However, it is not enough for the seller to simply describe it as “non-binding”. The dealer must have unlimited freedom to set prices. All measures that the seller takes to enforce the recommended price in the context of a non-binding price recommendation do not make the price recommendation non-binding, but rather a vertical price fixing that is inadmissible under antitrust law. Special incentives such as bonuses, discounts or refunds if the recommended price is adhered to or disadvantages if the recommended price is not followed, such as delivery stops, delivery delays or the threat of contract termination, are therefore prohibited.
The current proceedings concerned agreements between those responsible for a purchasing group and almost 50 bicycle retailers regarding fixed prices. According to these agreements, retailers were obliged not to fall below the minimum sales prices set by the purchasing group, also known as the “lowest price”, when selling current bicycle models. Some of the agreements ran for more than ten years and only ended when the purchasing group's business premises were searched by the Federal Cartel Office. The purchasing group or its representatives also checked whether the retailers adhered to the minimum sales prices. In particular, you have received information from the dealer circle about price undercuts by other retailers or have carried out price research yourself or had it carried out. Bicycle retailers who undercut the minimum sales prices were required to comply with them. This also turns a non-binding recommended price into a fixed price that is not permitted under antitrust law.
Price fixing – What’s new for purchasing groups?
The Federal Cartel Office has imposed a fine totaling EUR 13.4 million on this purchasing group for vertical price fixing. The President of the Federal Cartel Office, Andreas Mundt, confirmed this in the Federal Cartel Office's press release of January 29, 2019:
“ZEG has reached agreements with its member companies on final sales prices for certain bicycle models. The independent retailers were encouraged not to fall below the minimum sales prices set by the ZEG for various bicycle models. This also severely hindered price competition between the members of the purchasing cooperation towards the end consumer.” (Source: Federal Cartel Office, online press release from January 29, 2019)
The Federal Cartel Office has also made it clear that minimum sales prices can be set not only by the actual sellers of the products, i.e. manufacturers or importers, but also by purchasing groups, and this is contrary to antitrust law. Purchasing groups are, for example, associations of small or medium-sized companies as SME cartels (read here Further information on small and medium-sized businesses cartels and the antitrust requirements) that can realize advantages in purchasing, marketing or financing through the merger.
Temporary minimum price specifications and thus price maintenance can be permissible under antitrust law, but only under very strict conditions, for example in the case of joint special offer campaigns. However, fixed prices that are practiced and monitored over several years do not meet these requirements, not even in the context of purchasing groups.
Price fixing – What does the fine decision mean?
On the one hand, it is confirmed that the antitrust authorities are paying increasing attention to compliance with antitrust law in vertical relationships. Any form of price fixing can therefore lead to significant fines if discovered. On the other hand, small and medium-sized companies cannot rely on operating “below the radar” of the Federal Cartel Office. The cover of a medium-sized business cartel in the form of a purchasing group, which is permissible in itself, does not protect against the antitrust law of impermissible price fixing.
Price fixation – What is important to you now?
Agreements with fixed prices for resale prices should definitely be checked for their admissibility under antitrust law. In addition, if the price fixing has been discovered, cooperation should be carried out in clarifying the facts, especially by so-called “leniency witnesses”, i.e. retailers who actively report price fixing. When determining the amount of the fine, the Federal Cartel Office will regularly take into account the extent to which the price fixing could be clarified with the help of those involved and the fine proceedings could be ended by mutual agreement. But: Such cooperation with the antitrust authorities should not take place without legal advice. This applies in particular to the setting of the markers at the Federal Cartel Office: The first company that reports an antitrust violation in which it was involved and supports the investigation can benefit from a complete waiver of fines. However, customers still have claims for damages (read here Further information on the statute of limitations for antitrust damage claims).