The German Federal Cartel Office (FCO) has in the past six
months imposed fines for three violations of the antitrust rules
against resale price maintenance (RPM). These decisions signal an
increased risk of antitrust fines for suppliers active in Germany
that use a heavy hand to influence resale prices.
The antitrust rules of Germany and the European Community allow
suppliers to recommend resale prices and to agree with distributors
on maximum resale prices, but they prohibit fixed and minimum
prices. The EC block exemption regulation for vertical restraints
of trade provides that price recommendations must "not amount
to a fixed or minimum sale price as a result of pressure from, or
incentives offered by, any of the parties" (Article 4a of
Commission Regulation (EC) No 2790/1999). This regulation applies
under German law as well.
In the gray area between recommended resale prices (permissible)
and fixed or minimum resale prices (prohibited), the FCO has for
several years tolerated borderline practices. Recent decisions
indicate that the FCO has abandoned that tolerant policy.
The facts of these three matters are summarized below:
In October 2009, the FCO imposed a fine of €4.2
million on Phonak, one of the three leading suppliers of
hearing aids in Germany. A retailer had decreased its prices below
Phonak's recommended level and also published on the Internet
the prices it paid hearing aids manufacturers, revealing a
significant retail margin. As a result, other retailers became
concerned that they might have to answer to customers and the
social security system (which reimburses the costs for hearing
aids). Responding to those concerns, Phonak discontinued supplying
the maverick retailer, to force that retailer to increase its
prices and to discontinue publishing manufacturer prices on the
In September 2009, the FCO imposed a fine of €11.5
million on CIBA Vision the largest supplier of contact
lenses in Germany. The FCO found that CIBA Vision recommended
resale prices to retailers but also operated a monitoring and
intervention system to ensure that retailers complied with
recommended price levels. If a retailer undercut those prices, CIBA
Vision staff would try to persuade the retailer to increase its
prices. In addition, CIBA obtained an agreement from eBay that eBay
would not list offers to sell contact lenses produced by CIBA
Vision. Finally, CIBA required that CIBA Vision distributors not
sell CIBA Vision contact lenses through the Internet.
In April 2009, the FCO imposed a fine of €9 million on
Microsoft. The FCO found Microsoft guilty of
having influenced one retailer's resale price of a Word,
Powerpoint and Excel software package for home users. Microsoft and
the retailer had first agreed on the price for the package on two
occasions. Subsequently, the retailer advertised that price in its
stationery retail outlets with the financial support of
The amount of those fines may seem moderate. However, in all
three cases the FCO took into account that the businesses
cooperated with FCO staff and agreed not to appeal the FCO's
decisions. Future enforcement is likely to result in more
substantial fines, as the FCO now has sent a clear signal to
business that it will not tolerate any restriction of retail
pricing that amounts to any form of fixed or minimum resale prices.
Notably, when the FCO decided the amount of the fines, it
considered the total revenues of the supplier in the market, not
only the revenues the supplier generated with the products it had
sold to the distributor in question.
The FCO has taken in all three cases the position that the
competition rules do not generally prevent a supplier from
contacting distributors on its resale prices. However, suppliers
must not repeatedly or specifically approach retailers on this
subject, as the FCO might regard such communication as illegal
pressure to enforce fixed or minimum prices. As a consequence, the
supplier generally must not "seek to coordinate the
distributor's pricing such that the supplier and the
distributor are coordinated on the distributor's future
The Phonak decision (in English / German) is available at the FCO's
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