The Belgian and German competition authorities handed down settlement decisions for hub-and-spoke and retail price maintenance practices. These settlements signify the end of long-running cases in Belgium and Germany on market behavior and communications between suppliers and retailers. Discussions between retailers and suppliers on issues such as wholesale price, recommended retail prices and effects on margins are inherent in the relationship. However, these settlement decisions highlight that there are competition law limits to such discussions.
On 22 June 2015, the Prosecution service of the Belgian Competition Authority adopted its first settlement decision. In that decision, fines amounting to EUR 174 million were imposed upon 11 suppliers and 7 retailers for their participation in a "hub-and-spoke" cartel in the drugstore, perfumery and hygiene sector between 2002 and 2007 on the Belgian territory.
Following from a leniency application lodged by Colgate-Palmolive in 2006, inspections were conducted in April 2007. Subsequently, two other suppliers submitted leniency applications. The investigation revealed that the suppliers had acted as intermediaries and facilitators of coordination of behavior at the retail level. Either on their own motion or at the request of a retailer, suppliers transmitted information to retailers in order to try to arrange a coordinated increase of the retail prices. The decision mentions that these practices had varying degrees of success, with some retail chains not applying them at all or for short periods only. The limited success of the cartel was a mitigating circumstance in the fine calculation although the question of whether there were any effects on competition was left open since the case was brought as an object infringement.
The Prosecution service considered the conduct to be a horizontal infringement and granted full or partial immunity from fines to three suppliers.
On 18 June 2015, the German Competition Authority ("BkA") announced in a press release that it concluded its "vertical case" proceedings against manufacturers and retailers in the food sector for illegal retail price maintenance. The fines imposed to date, approximately EUR 152 million, have been the product of settlement agreements between the BkA and the parties concerned. Like in the Belgian case discussed above, the BkA granted total and partial immunity from fines in cases presenting vertical aspects.
The BkA found that the contracting parties would threaten, exert pressure or offer monetary incentives to retailers in order to impose and maintain retail prices. In addition, the BkA found that manufacturers would moderate the coordination of retail prices. Noteworthy, according to the press release, is the role that retailers played in urging manufacturers to persuade other retailers to observe the retail price level. The President of the BkA clarified that only those practices "which constitute a clear restraint of competition and an explicit violation of competition law" were punished. That statement appears to suggest that the BkA left alone discussions between suppliers and retailers concerning recommended or desired retail prices absent clear horizontal elements. There are three case summaries that provide insight into some of the behavior that rose to the level of infringement in these sectors.
Regarding the coffee sector, the investigation led the BkA to uncover a price maintenance agreement between retailers and Melitta Europe GmbH. The infringement involved Melitta setting the retail price recommendation for a calendar week. Melitta then required explicit commitments from retailers to raise the sales prices to the level of the Melitta recommended price. There were one-time payments and financial remuneration offered as incentive. At the same time, the threat of no remuneration or compensation for advertisement was also an incentive for compliance. The parties also exchanged information on expected and actual price increases of other retailers.
Regarding the food production, distribution and retail industry, the BkA uncovered vertical agreements to fix prices for the Ritter chocolate tablets and Haribo candy. For Ritter GmbH chocolate tablets, retailers agreed with the manufacturer to maintain fixed retail prices. To ensure compliance, the manufacturer offered financial compensation, discounts on purchase prices, rebates and a delay on an increase in the purchase price.
Moreover, regarding fruit gums and liquorish, Haribo GmbH systematically monitored the retail prices to influence and ensure compliance with minimum selling prices. The infringement involved Haribo exerting pressure on Aldi to raise the retail price. Upon receiving confirmation from Aldi of the price raise Haribo informed other retailers which subsequently raised their prices. Haribo also actively monitored adherence to the recommended retail price level. Haribo used verbal arguments to discourage retailers from offering lower prices, citing the collective good of the participating entities and the brand as paramount. These arguments were largely successful. However, when they failed, Haribo threatened not to supply and sometimes actually refrained from supplying its products to retailers. There were also financial incentives to dissuade retailers from offering lower prices.
Both the Belgian and German Competition Authorities focused on situations in which there are clear horizontal elements at the retail level. The settlement decisions in both jurisdictions thus highlight the "no-go" areas in the communications between suppliers and retailers.