The new Vertical GVO 720/2022, short for “Block Exemption Regulation”, of the European Commission from June 2022 and its guidelines still contain the ban on the provider or supplier from specifying prices to the dealer or buyer that act like minimum prices or fixed prices and which the dealer vis-à-vis his customers have to set. The reseller must always remain free to set the sales prices for his range of goods himself. Likewise, the retailer may not be prohibited from using portals for customers to compare prices and from offering their products there. According to the Vertical GVO 720/2022, only non-binding recommendations for sales prices and maximum prices are permitted.
Principle: Non-binding recommended prices are permitted
Non-binding recommendations for sales prices and information from the provider to dealers on how they can best structure their resale prices are permitted. However, certain forms can be critical under antitrust law. Any direct or indirect restriction on dealers' ability to set their own resale prices is an inadmissible restriction of competition and is being punished more and more consistently by the Federal Cartel Office.
Simply handing over a list of non-binding recommendations for resale prices by the supplier to inquiring dealers does not result in price fixing that is not permitted under antitrust law and is therefore permitted. When handing over a non-binding price list, a supplier may therefore also explain the reasons for the recommended price and generally explain what strategy the supplier is pursuing for positioning and marketing the products from the company's range.
However, it is necessary that the recommendation remains legally and actually non-binding. Any direct or disguised restrictions on dealers' freedom to determine prices are therefore inadmissible. Any agreement or - even tacitly - coordinated behavior between the supplier and the customer in oral or written form to bindingly set resale prices or lower limits for (promotional) prices is a restriction of competition, which is usually a restriction of competition and mean a violation of antitrust law, without an antitrust exemption being conceivable in individual cases.
Overview of generally permitted measures
Antitrust law allows the following vertical agreements on resale price for the reseller's offering.
Recommended retail prices (RRP)
Non-binding recommended prices, or “RRP” for short, and the presentation of price lists with non-binding recommended prices are permissible under antitrust law. The limit must be drawn where the recommended price is described as non-binding, but from the perspective of a neutral merchant it must be viewed as binding because, in particular, accompanying measures have an economic incentive effect or hold the prospect of economic disadvantages. It is therefore important to ensure that the price recommendations are not accompanied by requests or requests to comply with them, refunds as rewards or threats of delivery stops.
Since the boundaries between an explanation of an RRP and a tacit agreement about compliance with a minimum price level are often difficult to draw, it follows antitrust law and the decision-making practice of the Federal Cartel Office always take into account the communication and the circumstances of the individual case. For example, repeated active approaches by the entrepreneur to specific dealers through calls or reminder emails about compliance with the recommended prices would be classified as critical.
However, supporting the dealer with price lists that he can enter into his own IT system appears permissible if the dealer is not encouraged to stick to the recommended prices. Deviations in dealer prices upwards and downwards can be marked in these price lists if this does not exert direct pressure on the dealer or, together with other price measures, indirect pressure.
The right to RRP applies regardless of the type of distribution. RRPs are therefore permitted in the context of a selective distribution system, active sales or passive distribution as well as in dual distribution and dual distribution systems and also in. As long as the retailer concerned can determine what he believes is the most favorable price and a recommended selling price is not subject to a specification due to undue pressure, the Vertical GVO 720/2022 and the new Vertical Guidelines allow this.
Special roll MAP or street prices
The new vertical GVO 720/2022 clearly regulates the inadmissibility of so-called binding “minimum advertised prices” (MAP), i.e. the minimum advertising prices. These minimum prices, which the dealer must display on price tags but then sell at a different price, are permitted in the USA, for example. According to the new vertical GVO 720/2022, MAPs or street prices are only permitted if the manufacturer only recommends them for the reseller's offer.
If a dealer wants to comply with the MAPs based on his free decision and can access the price lists with corresponding markings for checking in the dealer portal at his own discretion, without being obliged to do so by the provider, this should also be permissible. Since the limit for exerting pressure can easily be exceeded here, the manufacturer should point out to his employees again that accompanying emails or calls that point out non-compliance with the MAPs are very problematic under antitrust law and are an indication of inadmissible agreements restricting competition be considered.
Maximum selling prices
According to the Vertical GVO 720/2022, maximum sales prices may be set, either directly through the specific amount or indirectly, for example depending on declining discounts. The prerequisite, however, is that the price referred to as the “maximum price” is not an economically disguised minimum price. What is important is not the name or formal design, but rather the economic impact on the retailer's offer.
Permissible but risky measures
Even according to the Vertical Regulation 720/2022, the following measures are not per se restrictions on competition and are therefore permissible under antitrust law. However, in the opinion of the antitrust authorities, their exercise entails a risk and should therefore always be examined on a case-by-case basis to determine whether they are permissible.
Repeated discussion of the EIA
The repeated response
- the resale price of the respective dealer or
- a maximum possible undershoot of a non-binding recommended retail price or
- an otherwise recommended sales or (promotional) price
is only permitted as long as the limit to an attempt to influence has not been exceeded. The Federal Cartel Office is particularly sensitive to this. There is a risk under antitrust law in particular if the “discussion” of the recommended sales price goes beyond explaining the reasons for the initial transmission of non-binding price recommendations and the basic pricing strategy for positioning and marketing the products. Simply contacting us again after sending the non-binding price recommendation can be enough to enable the companies involved to coordinate their market behavior. This is particularly true if this renewed contact exerts indirect pressure or provides economic incentives.
Calculation aids
The mere provision of calculation aids or instructions for calculating sales prices by the manufacturer to retailers does not per se raise any antitrust concerns. However, they are critical when they are associated with economic incentives or disadvantages. The decisive factor here is the design in each individual case.
Price information on packaging
Price information and price prints can be compared with the specification of fixed prices. Because the dealer is prevented from setting his own price. This would enable the customer to compare prices and prevent them from approaching the retailer about a lower price. As part of an overall view, according to the Vertical GVO 720/2022, prints or stickers with the recommended retail price on the product packaging can also be questionable if they do not also contain a reference to the recommended retail price or a maximum price and the MI retailer is prevented from doing so to still freely determine its resale prices.
Measures that can lead to the inadmissibility of measures that are permissible
Pricing measures that are permissible in themselves can become inadmissible if they are linked to prohibited measures. The Federal Cartel Office pays particular attention to so-called “plus factors”, which can and must be viewed as indications of an agreement or coordinated behavior regarding resale prices, beyond the mere establishment of contact. These “plus factors” may include, in particular, a price monitoring and enforcement system operated by the manufacturing company, threatening or imposing delivery blocks or price maintenance systems.
Inadmissible specifications of a company according to the Vertical GVO 720/2022 are in particular
- Maximum margins or maximum discounts that the retailer is allowed to grant to its customers
- Granting of discounts and advertising cost subsidies depending on compliance with non-binding recommended prices. However, according to the new vertical BER, such measures without fixed prices are permitted as dual pricing if the manufacturing company wants to promote retailer investments in brick-and-mortar retail
- Fixed sales margins, especially in the form of price escalation clauses
- Linking resale prices to general market prices, particularly competitors' prices
- Support of advertising measures depending on compliance with specific (promotional) prices
According to the new Vertical Regulation 720/2022, vertical agreements or concerted practices that in themselves cause or have the purpose of creating economic incentives or disadvantages or that link measures that are permissible in themselves with such economic incentives or disadvantages are also inadmissible:
- Special discounts, special refunds or other compensation if a price level is maintained
- Brand or price maintenance discounts
- Promotional price supports
- Margin compensation payments or
- Granting other benefits or preferential treatment for maintaining a minimum dealer margin on the manufacturer's selling price
In particular, the manufacturer may not link measures that are permissible in themselves with the following economic disadvantages, because this would result in a non-binding selling price becoming economically binding pricing through undue pressure:
- Threats, intimidation, warnings
- Delistings
- Deterioration in conditions
- Termination, delay, suspension or limitation of deliveries
- Deletion or reduction of promotions, placements or image and brand usage rights
- Distribution channel restrictions
- penalties or
- Full or partial contract terminations due to non-compliance with a vertical pricing recommendation.
In principle, measures that are permissible in themselves can also become inadmissible under applicable antitrust law and the new vertical regulation 720/2022 if they occur in a bundling that, based on a reasonable economic assessment, no longer guarantees free price setting by the retailer. This also applies if, instead of lists with non-binding recommended prices, only the deviations of the dealer sales prices from the recommended RMAPs are communicated.
Price comparisons
Price comparisons, especially on corresponding ones price comparison portals, are an important decision-making aid for end customers who want to save, which is protected according to the new vertical GVO 720/2022. If a reseller wants to open his range of products to a price comparison, the manufacturer may not prevent him from doing so through vertical agreements or coordinated practices. In particular, the aforementioned measures, which are intended to encourage retailers to comply with a price comparison ban, are prohibited under Vertical Regulation 720/2022.
Consequences for violations
The mere handing over of a list of resale price recommendations by a supplier is not an act that, as such, results in vertical price fixing by the retailer. When submitting this list, the manufacturer may also point out the reasons for the recommended price and explain which strategies the provider pursues for positioning and marketing the products. However, the recommendation must remain legally and actually non-binding. As a result, it may only be implemented by retailers if they do so based on an autonomous economic decision. According to the Federal Cartel Office's assessment, even the suspicion of price fixing between the provider and dealers, even through measures that have an indirect effect, can trigger antitrust investigations. Violations can constitute an administrative offense and can be punished with fines against the company and also against its managing director personally with up to 10% of the total company turnover. That too Managing Director can be affected by a personal fine is often overlooked
