LEGO, the Danish toy manufacturer, has agreed to adjust its discount system for online sales, after the German Federal Cartel Office Federal Cartel Office (FCO – Bundeskartellamt) initiated official antitrust proceedings after receiving complaints from online retailers.
The complaints alleged that the existing LEGO discount-system rewarded certain functions carried out by retailers, and at least de facto differentiated significantly between online and offline sales. Offline retailers with physical stores were able to receive discount levels based on criteria that only they could fulfill (for example, receiving a discount based on the number of metres of available shelf space in the stores reserved for Lego products), offline retailers were offered favourable prices in comparison to the online retailers. Such conduct constitutes an infringement of Article 101 TFEU.
During the antitrust proceedings, the FCO found the LEGO-discount-system to be structurally disadvantageous towards online retailers, for even ideal online-retailers were not able to reach a discount level that put them in a position to compete on an equal footing with the prices of their physical store counterparts. Whereas it is the right of a manufacturer to set certain quality standards for the distribution of its goods and grant its retailers different levels of discount for different services, the FCO held that this does not entitle the manufacturer to put a specific distribution channel at a disadvantage. Such rebate systems may qualify as dual pricing system if online sales are not privy to the same amount of discounts as offline sales.
As a result of the FCO’s findings, LEGO agreed to adapt its discount-systems by introducing additional criteria for online sales tailored specifically to of this distribution channel, thereby enabling actual competition between online and offline sales for the benefit of the consumer.
The case at hand clearly shows the necessity for manufacturers and wholesalers to take into account the provisions of competition law when designing their discount systems. Whereas the rule of indiscriminate treatment seems to be rather obvious at first sight, the case studies of the FCO in Bosch Siemens Hausgeräte und Dornbach prove that the devil is in the detail, especially when it comes to formulating and introducing alternative discount criteria to ensure an equal playing field between online- and offline retailing (and still serve the needs of the manufacturer).