Martin André Dittmer Rebecca Fink Joensen August 11 2022 Retailer's division into exclusive marketing districts infringes competition law Gorrissen Federspiel | Competition & Antitrust - Denmark Martin André Dittmer, Rebecca Fink Joensen Competition & Antitrust FactsDecisionCommentOn 22 June 2022, the Danish Competition Council (DCC) published a decision on a collusion within the home textile industry. The DCC found that Boligtextilbranchens Indkøbsservice (Botex) had established a market-sharing cartel by assigning exclusive marketing districts to its members. The practice constituted an infringement of section 6 of the Danish Competition Act and article 101 of the Treaty on the Functioning of the European Union (TFEU).FactsBotex is a Danish association of undertakings, all of which are retailers of home textiles with shops in Denmark. The individual retailers share Botex branding but are competitors for the purpose of competition law. The association is managed by a board and an executive committee consisting of members, which negotiate agreements with suppliers on behalf of Botex. Botex also distributes products under the Botex label to its members, who each own a share in the company, and sells home textiles directly to retail customers via a single online shop.This cooperation is based on written trade agreements and articles of association. Clause 7.7 of the written trade agreement from 2009 defined an allocated "marketing area/trade district" to each member, which was demarcated by postcodes. It followed from clause 7.8 of the trade agreement that the marketing district provides an exclusivity in relation to marketing through household-distributed advertising, including the distribution of campaigns and catalogues, as well as the entry of new members into the defined area.The trade agreement, therefore, set out exclusivity rules for the geographical distribution of household advertising, and the members could be fined if they failed to comply with the conditions for maintaining such exclusivity. Clause 7.8 of the trade agreement was in force until 18 August 2021, when a new trade agreement was signed. The new trade agreement did not entail rules on exclusive marketing districts; therefore, the conduct had taken place at least for 12 years, from 2009 to 2021.DecisionIn its decision, the DCC found emails between members that showed that some members had understood the division into marketing districts and the prohibition for members to market themselves outside their districts to mean "all types of marketing, including in radio, television and cinema". Some members sent cease and desist letters to others for this type of marketing with reference to the exclusive marketing districts. The radio, television and cinema marketing was subsequently taken down from the district in question.Botex stated that the reason for the exclusive marketing districts was to avoid consumers receiving multiple advertisements from different Botex stores. According to the DCC, the division of markets into geographical marketing districts reduced competition between the Botex stores and affected the members' strategic choices – for example, regarding pricing and campaigns. Further, a division of the market into districts can hinder consumers' access to information and their ability to compare the individual Botex stores' prices and quality. Generally, this practice can lead to:higher prices;poorer service;inferior quality of products; andlimited supply.The DCC found that the agreement to assign exclusive marketing districts to members constituted a market-sharing cartel. The agreement was an infringement by object in breach of the prohibition on anti-competitive cooperation in section 6 of the Danish Competition Act and article 101 of the TFEU.The DCC ordered Botex to cease the illegal conduct and to refrain from similar activities in the future. The DCC will refer the matter to the Maritime and Commercial Court in order to impose a fine on Botex.Comment This is the first time that the DCC has been able bring a fine request before the Maritime and Commercial Court, following an amendment to the Danish Competition Act. The amendment entered into force on 4 March 2021 as a result of the implementation of EU Directive 2019/1/EU (for further details please see "Competition authorities given power to fine companies for breach of competition law"). The legislative amendment created a new civil financial penalty system, which allows the DCC to request fines before the courts in non-criminal judicial proceedings for the purpose of measuring civil fines and for issuing fines to undertakings. Before the amendment, all cases regarding penalties were tried as criminal cases.The decision also shows that the division into exclusive marketing districts between members of an association of undertakings, in relation to marketing through household-distributed advertising, constitutes a market-sharing cartel.For further information on this topic please contact Martin André Dittmer or Rebecca Fink Joensen at Gorrissen Federspiel by telephone (+45 33 41 41 41) or email ([email protected] or [email protected]). The Gorrissen Federspiel website can be accessed at www.gorrissenfederspiel.com.