By decision of 15 May 2012, recently published, the German Federal Court of Justice ("the Court") annulled a decision of the Higher Regional Court of Stuttgart ("HRCS"), by which the latter had annulled a decision of the federal cartel office ("FCO") finding that a dominant water supplier had imposed excessive prices on its retail customers. In its decision, the Court clarified that a finding of excessive pricing within the meaning of Section 19(4)(2) of the German Act Against Restraints of Competition ("GWB") was not limited to comparing the dominant undertaking's prices to those of undertakings in comparable markets where effective competition prevails, but could also be assessed by taking account of the dominant undertaking's pricing elements.

In February 2011, the FCO ordered the water supplier to lower its base price for water and not to apply a net price exceeding a certain level. The FCO had based its finding of excessive pricing exclusively on the examination of the pricing elements that had been applied by the dominant water supplier, and had concluded that prices would have been different if a comprehensible and appropriate pricing procedure had been applied. According to the FCO, such appropriate procedures could be derived from, e.g., the German Electricity or Gas Grid Ordinances. The FCO did not, however, compare the dominant water supplier's prices to those of water suppliers on comparable, competitive markets.

The FCO's decision was annulled by the HRCS, which found that the method comparing a dominant undertaking's prices to those of undertakings in comparable markets had priority over the cost-based approach taken by the FCO.

The Court, in turn, rejected the HRCS's approach, upholding the FCO's original finding. The Court held that, for the determination of excessive pricing, factors other than the comparison of prices between undertakings in comparable markets could also be examined. According to the Court, the application of a different method could in particular be appropriate where no comparable markets with effective competition existed. As regards the method applied by the FCO to examine the dominant undertaking's pricing elements, the Court held that uncertainties in individual cases could be taken account of by the use of safety margins in making pricing calculations.

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