Again fines for RPM in Germany: Furniture manufacturers fined - retailers avoid fines
The German Federal Cartel Office (hereafter FCO) recently imposed fines for Resale Price Maintenance (hereafter RPM) again – this time totaling EUR 4.43 Mio against five furniture manufacturers. Four managers were also fined for their involvement. After the FCO recently fined LEGO and multiple companies in the food retail sector, this is another example for the intensified scrutiny of national enforcers.
Hülstawerke Hüls GmbH & Co. KG, Rolf Benz AG & Co. KG, Heinz Kettler GmbH, aeris GmbH and the Zebra Nord GmbH each imposed RPM on their respective retailers and ensured adherence by setting-up an sophisticated surveillance system. In essence, retailers were required to report on non-adhering retailers. The latter were threatened with supply stops or even a termination of supply. In addition, special rules were set-up for online distribution aiming at enforcing a firm and stable price structure in the market.
After several retailers complained, the FCO initiated antitrust proceedings and in in June 2014 and July 2015 dawn-raided the manufacturers. The FCO imposed fines on the manufacturers in August, November and December 2016 and now published a short case report and a press release concerning its decisions.
The FCO used its fining discretion and did not impose fines against any of the undertakings’ retailers even though these retailers had asked “the manufacturers to ensure that the price level was maintained”. It should be kept in mind that retailers can benefit from RPM, because (intra-brand) price competition is eliminated which basically guarantees them a certain retail margin. While it seems that the retailers were in this case foremost regarded as victims of the infringement and that the FCO wanted to keep incentives to report anticompetitive vertical conduct, it should be noted that the FCO has fined retailers for RPM for example in the food retail sector in the past. Therefore, it may very well choose to do so again in the future depending on the specifics of the case at hand.
The FCO also reduced some fines significantly, because of the “limited financial capacity” due to ongoing restructurings. Since the FCO – and the EU-Commission alike – are rather hesitant to accept arguments regarding the so-called inability to pay, this is a rare case that the parties could convince the authorities. The EU-Commission takes account of a company’s inability to pay when a) the imposition of a fine would irretrievably jeopardize its economic viability and cause its assets to lose all their value and b) the existence of a specific social and economic context which can be argued, inter alia, if the sector concerned by the decision is going through a cyclical crisis (e.g. suffering from overcapacity or falling prices, mounting unemployment). The EU-Commission granted a significant fine reductions on this ground, for example, in the cases of Colour Picture Tube, Fasteners and Window Mountings. The latest FCO decisions now suggest that an inability to pay-argument can also prevail in Germany, even if the fines imposed are already moderate.
The FCO will continue its efforts to combat RPM – regardless of whether or not there is actual evidence of horizontal collusion, in this case between the aforementioned furniture manufacturers. Thus, the FCO’s most prevalent competition con-cern is that RPM deprives retailers of their economic freedom to act, because as the FCO’s president, Andreas Mundt, states “If competition between retailers is restricted, it is the customer who suffers.” In light of this, companies should be aware that it is an uphill battle to argue for an individual efficiency exemption for RPM (see Art. 101 para 3 TFEU or Section 2 of the German Act against Restraints of Competition).
Over the last years, the FCO has adopted many decisions regarding RPM and the adoption of these last decisions suggests that clear-cut cases will remain one of its enforcement priorities for the time being. Therefore, it is important for companies to include this aspect in compliance trainings and measures when scrutinizing sales and distribution practices.
Any questions? Please contact: Alexander Israel, Dr. Fabian Hübener
Practice Group: Antitrust & Competition