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Five furniture manufacturers sanctioned in Germany over resale price restrictions

Out-Law News | 12 Jan 2017 | 3:42 pm | 2 min. read

Five furniture manufacturers have been fined a total of €4.43 million by Germany's main competition authority over their manipulation of resale prices for their goods charged by retailers.

The Federal Cartel Office (FCO) said aeris, hülsta-werke Hüls, Kettler, Rolf Benz and Zebra Nord, as well as four managers, had breached German competition laws. Between them the companies manufacture products such as free-standing and upholstered furniture, office chairs, and garden and leisure furniture.

Munich-based competition law expert Michael Reich of Pinsent Masons, the law firm behind Out-Law.com, said businesses that engage in resale price maintenance practices can generally expect to receive a fine form competition authorities.

"The German competition authority, as with most other European authorities, has by now a long standing record to fine resale price maintenance practices across all industries," Reich said.

Reich said the case involving the furniture manufacturers featured classical examples of practices that together constitute resale price maintenance.

He said the goods had a recommended retail price (RRP) attached to them, although discounts could be offered on some goods during particular sales campaigns. A monitoring system for price attacks existed, and retailers were threatened with their supply being cut off if they sold the goods below the RRP. In some cases, those threats were carried out by the manufacturers.

Reich said that cases of resale price maintenance can be distinguished from other forms of restrictions manufacturers might impose on retailers.

Reich said that this includes so-called third party platform restrictions, which a court in Germany has been considering. That case, which involves US beauty products manufacturer Coty and German retailer Parfümerie Akzente, is currently before the Court of Justice of the EU (CJEU). The EU court is scheduled to rule on whether brands can place restrictions on the channels through which their goods can be bought for the purpose of ensuring those products are viewed as luxury items. The significance of the case has been noted by the UK's competition authority.

"On the issues arising in the Coty case, the FCO seems to take a more rigid approach than the European Commission, and the case law is inconsistent," Reich said, "However, in the case of resale price maintenance, the situation is different. Although the Commission’s vertical block exemption guidelines state that resale price maintenance may in exceptional cases lead to efficiencies, for example during a short period of time after the introduction of a new product in the market, there are no decisions of any competition authorities where a resale price maintenance scheme was considered legal or exempted from the cartel prohibition."

In its statement, the FCO said it was alerted to the furniture manufacturers' practices by complaints made by retailers. The regulator carried out dawn raids at the companies' premises and said that its investigations found "clear-cut cases of vertical price fixing".

"The manufacturers had applied inadmissible pressure on lower-price retailers in order to influence shop prices, in particular by threatening to refuse to supply to them and in some cases by carrying out those threats," the FCO said.

"To some degree competing retailers had also helped to monitor compliance with the minimum sales prices set by reporting to the manufacturers those retailers that had deviated from the set price and asking the manufacturers to ensure that the price level was maintained," it said.

The FCO said that whilst retailers can be the subject of enforcement action for their part in resale price restrictions, it had decided not to impose fines on the retailers concerned in this instance.

"Manufacturers may only make non-binding price recommendations to retailers and not oblige them to comply with set resale prices," Andreas Mundt, president of the FCO, said. "If competition between retailers is restricted, it is the customer who suffers. The [FCO] has already imposed fines for anti-consumer pricing practices in several proceedings recently, e.g. in the food retail sector and in the sale of mattresses and navigation devices. The present case concerns yet another product area which is of importance to consumers."