Sarah Vogel

Sarah Vogel

In September the Higher Regional Court of Düsseldorf rendered its decision on vertical price fixing in the case Reuter/Cor (VI‑U (Kart) 3/19). Although, so far, the ruling apparently has not received much public attention, the court’s reasoning is in my view quite remarkable in particular when compared to the decisional practice of the Federal Cartel Office (“Bundeskartellamt”).

In other jurisdictions the effects of vertical agreements on competition are often considered to be at least ambiguous and therefore vertical agreements are treated quite liberally. However, the German approach to vertical agreements is traditionally a rather strict one. The Federal Cartel Office especially has in the past demonstrated a critical approach to all kinds of manufacturer’s efforts to determine the conditions under which their products are resold.

One topic that comes up frequently in the context of vertical agreements is non‑binding price recommendations provided by manufacturers to the resellers of their products. The question is under which circumstances these recommendations really are “non‑binding” or in other words at which point they turn into resale price fixing.

While the Federal Cartel Office acknowledges that non‑binding price recommendations as such are perfectly admissible, the repeated reference to or explanation of a non‑binding price recommendation especially towards a reseller with prices below the recommended ones can already constitute an infringement of competition law. In 2009 the Federal Cartel Office fined a manufacturer (inter alia) for having contacted resellers whose prices in the manufacturer’s view differed too much from the recommendation (“CIBA Vision”). The Federal Cartel Office held that a manufacturer who not only hands out a non‑binding price recommendation but subsequently makes the recommendation a subject of discussions with his reseller is already exerting pressure within the meaning of Art. 4 a) VBER. Such communication in the Federal Cartel Office’s view makes it clear to the reseller that his resale prices are being monitored and there will be consequences in case his prices do not meet the manufacturer’s expectations.

The recent decision of the Higher Regional Court of Düsseldorf in the case Reuter/Cor takes a more lenient approach to a manufacturer’s communication on prices towards its resellers. Online reseller Reuter claimed damages from the furniture manufacturer Cor on the grounds of an alleged resale price fixing. The manufacturer Cor achieves 99% of its turnover with brick and mortar stores. In the past some of these brick and mortar resellers had allegedly complained to Cor about the Reuter’s supposedly too low prices and had also threatened to discontinue the manufacturer’s products in case Cor did not “solve this problem”. As a reaction Cor discussed prices with Reuter.

After carefully assessing a potential violation of competition law the court came to the conclusion that no evidence for such violation was to be found. The court dismissed the claim for damages firstly on the ground that there was no evidence of an agreement on prices between manufacturer Cor and reseller Reuter. Secondly, the court did not find evidence for the manufacturer Cor having threatened the claimant within the meaning of § 21 para 1 of the Act against Restraints of Competition (“GWB”). The court stated that there were numerous contacts between the manufacturer and the claimant in which the claimant’s prices were discussed and the manufacturer “asked” the claimant to raise his prices. But in the court’s opinion this alone does not justify to conclude that the manufacturer threatened the claimant with any disadvantage to make him raise price. In its assessment the court took into account that the economic circumstances of the manufacturer and the claimant did not indicate an imbalance of power to the detriment of the claimant. Against this background the court acknowledged the manufacturer’s economic interest to ask the claimant to reconsider his pricing policy. By this, the manufacturer Cor tried to honor the interests of his brick and mortar resellers to a certain extend and at the same time promoted his own economic interests. The court concluded that by asking the claimant to take Cor’s economic interests into account Cor did not try to threaten the claimant in any way. Moreover, a manufacturer who only asks a reseller to also take the manufacturer’s economic interests into account when setting his resale prices does respect the reseller’s independency in setting his prices.

With its decision the Higher Regional Court of Düsseldorf takes – to some extent in line with other jurisdictions – a step towards a more liberal approach on what amounts to illegal pressure with respect to communication on price recommendations and the reseller’s actual prices. It will be interesting to see if this approach prevails and will also resonate in the Federal Cartel Office’s practice.

Dr Sarah Vogel is an associate at Glade Michel Wirtz, Düsseldorf.