Introduction

The Federal Supreme Court has ruled that the Federal Association of Press Wholesalers did not breach EU competition law when it negotiated uniform contract conditions with publishers on behalf of its members (KZR 17/14). The court quashed the Dusseldorf Court of Appeals decision that found the joint negotiations to be anti-competitive. The claimant was distribution company Bauer Media Group, one of Germany's largest publishing houses. The defendant was a sector association to which all independent press wholesalers belong.

In Germany, virtually all press articles sold in retail (apart from train station bookshops) are distributed by press wholesalers. As a rule, only one wholesaler distributes the publications from all publishing houses to a given area. Therefore, there is hardly any competition among wholesalers, since the delivery areas are defined in the contracts with the publishers.

The wholesalers purchase the newspapers and magazines from the publishers and sell them to retailers in their areas at fixed prices (for further details please see "Federal Supreme Court upholds termination of press wholesaler"). The remuneration of the wholesalers is based on the trading margins agreed between them and the publishers. These trading margins are agreed for several years at a time.

Decision

The defendant conducted joint negotiations on the trading margin on behalf of its members. As a result, thus far the prices and conditions between publishers and wholesalers have been uniform. The claimant wanted to put an end to the wholesalers' centralised negotiating power and to negotiate the conditions of the contracts on an individual basis with each wholesaler. The claimant therefore wanted to prohibit the defendant from negotiating and agreeing on uniform wholesale conditions for press wholesalers in Germany, and to prohibit the defendant from demanding that press wholesalers refuse individual negotiations with the claimant on wholesale conditions.

After the Cologne District Court handed down a judgment on February 14 2012 prohibiting the joint negotiations, the legislature reacted and included a new Section 30(2a) of the Act Against Restraints on Competition (for further details please see "Press wholesale system to end as we know it?"). Through Section 30(2a), the members of the wholesalers' association are entrusted to provide a service of general economic interest – to distribute newspapers and magazines everywhere and without discrimination (for further details please see "Introduction of SIEC test and changes for the press industry").

The Federal Supreme Court dismissed the claim after the change in legislation. Pursuant to Article 106(2) of the Treaty on the Functioning of the European Union (TFEU), as read with the new Section 30(2a) of the Act Against Restraints on Competition, Article 101(1) of the TFEU does not apply to the central negotiating mandate.

The Federal Supreme Court argued that under Article 106(2) of the TFEU, application of the EU cartel law is excluded if an undertaking is entrusted with operation of services of general economic interest and the application of competition rules would obstruct the performance, in law or in fact, of the particular tasks assigned to the undertaking. That press wholesalers are entrusted only insofar as they enter into an agreement within the trade – as mentioned in Section 30(2a) of the Act Against Restraints on Competition – does not rule out the validity of such entrusting. This does not constitute a condition, the occurrence of which is uncertain. The legislature made a conscious decision to use the existing market situation as the starting point. The market has been characterised by such agreements in the branch and these agreements have been used for decades. They ensure that press is distributed throughout Germany without discrimination. The application of competition regulations to the defendant's central negotiating mandate would prevent fulfilment of the tasks entrusted to the press wholesalers according to Article 106(2) of the TFEU. According to European Court of Justice case law, it is sufficient if application of competition regulations endangers fulfilment of these tasks. The assessment would require a complex prognosis of how the market relationships would develop if the competition rules were to apply. If, as in this case, there is not a Community regulation and there is great uncertainty with respect to the prognosis, the state legislature is granted leeway to make its assessment. The court mandate is restricted accordingly. Thus, the assessment by the legislative body that distribution of newspapers and magazines in a comprehensive and non-discriminatory manner is jeopardised if competition regulations apply is unobjectionable under EU law. The same applies to the assessment that the central negotiating mandate is suitable for ensuring distribution of press articles that is comprehensive and free from discrimination.

Comment

From the wholesalers' perspective, the decision is a milestone that protects the diverse and multifaceted press market. It ensures market access to wholesalers at the same conditions, and that press articles are available everywhere. The claimant could otherwise have achieved better conditions at the expense of smaller publishing houses and unprofitable retailers. It is notable that the lawmakers first introduced the exception provision in Section 30(2a) of the Act Against Restraints on Competition after the Cologne Regional Court found that the central negotiating mandate was inadmissible anti-competitive behaviour. A legislative body can readjust in the context of ongoing proceedings if the exemption regulations of antitrust law do not result in a politically intended goal to serve general interest.

For further information on this topic please contact Markus Schoner at CMS Hasche Sigle by telephone (+49 40 37 63 00) or email (markus.schoener@cms-hs.com). The CMS Hasche Sigle website can be accessed at www.cms-hs.com.

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