The German Federal Cartel Office ("BKartA") has yet again fined a distributor for committing an infringement of competition law relating to resale price maintenance ("RPM"). Following its decisions in Microsoft (software package), CIBA Vision (contact lenses) and Phonak (hearing aids), the BKartA has fined Garmin Deutschland GmbH ("Garmin") (a producer of portable navigation systems) and a Garmin employee, €2.5 million for operating a prohibited resale price maintenance system.
Garmin contacted the BKartA in October 2009 and reported a system of "kickback" payments it once had in place. Although the conduct had ceased by the time Garmin contacted the BKartA, Garmin had in the past charged specialist retailers, who had their own internet sales platform and sold Garmin's navigation systems at relatively cheaper prices over the internet, a higher price for its portable navigation systems than other retailers. If these specialist retailers raised the price of the relevant navigational systems to a fixed minimum price, Garmin retrospectively awarded them with a bonus, taking into account the loss the retailers had made through the adoption of the fixed minimum pricing level.
In setting the fine, the BKartA took into account the profit Garmin made during the retrospective "kickback" program in Germany for specialist vendors. Rather than contesting the fine or arguing for a possible reduction in the German courts, both Garmin and the employee in question, have agreed to a settlement with the BKartA, thereby accepting the fine.
This decision has been issued not long after the fines issued by the BKartA in 2009, including those on Microsoft (fine of €9 million for an RPM infringement in relation to its software package "Office Home & Student 2007" in April 2009), CIBA Vision (fine of €11.5 million for an infringement relating to recommended RPM for contact lenses in September 2009) and Phonak (fine of €4.2 million in relation to the RPM for hearing aids in October 2009).
Of late, vertical relationships have been the subject of intense scrutiny by the BKartA. Although the European Commission in its new Vertical Guidelines outlines certain exceptional circumstances in which RPM can be justified, the BKartA's enforcement activity clearly shows that the German authority views any kind of RPM extremely critically. Companies are therefore well advised not to influence the prices of their distributors
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