Background
Decision
Comment



On November 6 2012(1) the Federal Supreme Court confirmed a judgment of the Berlin Court of Appeal,(2) which concerned a telephone call between a supplier and one of its retailers. Both courts found that the supplier had exerted illicit pressure on the retailer in order to enforce prohibited resale price maintenance. The judgments illustrate the considerable risks associated with any contact by a supplier with its retailers regarding retail prices.

Background

The subject matter of the underlying case, a civil lawsuit, concerned a telephone call made by the sales representative of a producer of backpacks. The sales representative approached a retailer which predominantly sold the producer's backpacks via the Internet and considerably undercut the supplier's recommended retail prices. While the exact content of the call remained contested between the parties, the Berlin Court of Appeal based its verdict on the supplier's version, which alleged that in the call the sales representative mentioned that he could "not economically comprehend" the retailer's prices. Asked by the retailer whether this would mean that he would not be supplied with backpacks in the future, the sales representative responded that he had "not said such a thing".

Decision

The Berlin Court of Appeal found the supplier guilty of a violation of Section 21(2) of the Act against Restraints of Competition. Among other things, the provision declares it unlawful for an undertaking to threaten any other undertaking in order to induce it to engage in conduct which, under the act or according to a decision issued by a cartel authority pursuant to the act, shall not be made the subject matter of a contractual commitment (eg, minimum resale price maintenance). As regards whether the sales representative had threatened the retailer within the meaning of the provision, the court followed explicitly the Federal Cartel Office's strict practice on recommended retail prices and the subsequent discussion between supplier and retailer. In a 2009 decision(3) the Federal Cartel Office stated that it constitutes illicit pressure within the meaning of Article 4(a) of Regulation 330/2010 if a supplier first sends out its recommended retail prices and later approaches a retailer in order to discuss them. Such behaviour would give the retailer a clear signal that the supplier is monitoring the retail prices, and that it would not remain without consequence for the retailer if it deviated from the recommended retail prices. Therefore, the court did not consider it contrary to a breach of Section 21(2) that the sales representative in the call neither referred explicitly to the supplier's recommended retail prices nor explicitly threatened the retailer.

However, the court did not rely solely on Federal Cartel Office practice, but also took into account the circumstances of the case, which it construed in such a way that the retailer could only interpret the call as an attempt by the supplier to exert unlawful pressure in order to influence retail prices. In particular, the court emphasised that the retailer obviously understood the call as a threat, since he asked the sales representative whether the supplier would refuse to supply him in the future. The fact that the sales representative responded only vaguely to this question, instead of denying it unambiguously, was specifically condemned by the court. The court also observed that the supplier put forward no argument indicating that the contentious call was motivated only by fears for the viability of the retailer's business (ie, the viability of one of the supplier's sales channels).

The Federal Supreme Court confirmed the judgment of the Berlin Court of Appeal, but explicitly left open the question of whether any contact by a supplier with its retailers regarding previously sent recommended retail prices fulfils the conditions of Section 21(2). The Federal Supreme Court pointed out that it did not need to decide on this issue, since the Berlin Court of Appeal had closely examined the circumstances of the case - an examination which the Federal Supreme Court did not consider to be flawed.

Comment

Unfortunately, the Federal Supreme Court did not clarify whether any contact by a supplier with its retailers with regard to previously sent recommended retail prices constitutes a violation of competition law. Both the Federal Cartel Office and the Berlin Court of Appeal appear to take this stance (although they also both closely examined the circumstances of their respective cases). However, it is at least clear that suppliers run a high risk if they address their recommended retail prices to their retailers at a time when the recommended retail prices have already been sent out.

For further information on this topic please contact Christoff Soltau at CMS Hasche Sigle by telephone (+49 40 37 63 00), fax (+49 40 37 63 040 600) or email (christoff.soltau@cms-hs.com).

Endnotes

(1) Federal Supreme Court, November 6 2012, KZR 13/12.

(2) Berlin Court of Appeal, February 2 2012, 2 U 2/06 Kart.

(3) Federal Cartel Office, September 25 2009, B3-123/08.