The Supreme Court upheld a decision of the Cartel Court against SPAR, a leading company in the Austrian food retail sector, concerning collusion on resale prices (Resale Price Maintenance; RPM) with suppliers of dairy products. At the same time, the court increased the fine imposed by the Cartel Court tenfold, i.e. from EUR 3 million to EUR 30 million.

1 Case Background

The Cartel Court had fined SPAR, one of the major players in the Austrian food retail sector, EUR 3 million for vertical and horizontal collusion on resale prices with various suppliers between July 2002 and March 2012. The proceedings were limited to dairy products, while proceedings for other product categories are still pending in first instance. As established by the Cartel Court,[2] SPAR had developed a general strategy that, whenever a supplier requested an increase of the purchase price, the retail margin must remain constant, not only with regard to SPAR sales but in the entire industry. Thus, increases of the purchase price were to be passed on to the end consumers. To this end, the relevant suppliers were required to inform SPAR's competitors about the agreed resale price by means of a 'price recommendation', and they were induced to implement this price level. The Cartel Court held that such practices are in breach of Article 101 AEUV as well as Section 1 of the Austrian Competition Act, because they limit not only suppliers but also other competitors at the retail level in their price-setting autonomy.

2 The Court's judgment

The Supreme Court upheld the Cartel Court's judgment on appeal and increased the fine imposed tenfold to EUR 30 million. The court justified the need to increase the fine pointing to the insufficient deterrent effect of the fine imposed by the Cartel Court in the light of the high turnover achieved by SPAR group and the (presumed) potential benefits resulting from the infringement. All in all, the Supreme Court considered a fine amounting to 0.35 percent of the global turnover of SPAR to be proportionate.

As regards setting of fines in general, the Supreme Court held that 10% of the group turnover achieved during the last business year constitutes not only a cap but the basis for the calculation of the fine. In this respect, the court followed the recent judgment of the German Federal Supreme Court in the case Grauzement [3] and explicitly deviated from the Fining Guidelines of the European Commission.

With respect to the argued 'novelty' of the infringement, the Supreme Court highlighted that the practices in question do not constitute a new type of competition law infringement but qualify as a vertical price fixing agreement reinforced at the retail level. The 'obligation' imposed upon the suppliers to promote a particular price level with competing retailers was considered to add to the gravity of the infringement, similar to a hub-and-spoke cartelization. According to the Supreme Court, there is no need for a direct agreement between retailers to take the additional adverse effect of such behaviour on competition into account.

3 Conclusion and practical implications

Having the actual facts of the case in mind, as established by the Cartel Court, it is not surprising that the Supreme Court confirmed the existence of an infringement. The much discussed question whether 'pure" resale price maintenance, without additional horizontal elements, inevitably qualifies as a 'restraint by object' was unfortunately not answered in the judgment.

From an overall perspective, the decision sets a milestone due to the statement that the 10 percent upper limit for fines sets the range for their calculation. This means that the fine calculation is primarily based on the overall turnover of the undertaking involved and not on the turnover that has been affected by the infringement. As a result, the size of the undertaking – meaning the entire group to which the respective defendant belongs – becomes more relevant than its actual participation in and the scope of the infringement. In practical terms this approach may effectively discriminate large groups of companies with business activities in several business areas vis-à-vis more specialized undertakings if the infringement relates to just one product area. Consequently, large groups may in the future expect substantially higher (and maybe even disproportionate) fines.

In our opinion, this appears somewhat unjustified, considering that the objective of the 10 percent upper limit (which is modelled on Article 23 of EU-Regulation 1/2003) is to ensure that the fine does not exceed the financial capacity of the undertaking concerned, rather than deterrence. In that respect, the Supreme Courts approach is in conflict with the intention of the Austrian legislator to adapt the Austrian Cartel Act to European competition rules. Currently, the Ministries of Justice and Economics prepare amendments to the Austrian Cartel Act, both with a view to implement the EU Damages Directive as well as to strengthen the Federal Competition Authority, not least in abuse cases. It remains to be seen whether the legislator uses this occasion to remedy possibly unwanted consequences of the SPAR decision.