Clifford Chance

On 13 March 2024, the German Federal Cartel Office ("German FCO") announced that it fined an Austrian manufacturer of protective clothing for vertical price-fixing.

Agreements between suppliers and distributors that set fixed or minimum resale prices ("RPM"), below which the supplied products or services will not be resold, are considered to be "hardcore" vertical competition law infringements. The main theory of harm is that RPM leads to excessive consumer prices. Recommended resale prices ("RRPs") are, however, generally not considered to be restrictive unless they are perceived to act as a fixed resale price. In other words, resellers must remain free to set their prices vis-à-vis end customers independently and unrestricted by the manufacturers' recommendations.

In this case, the German FCO accused Pfanner Protective Clothing of having restricted the ability of its resellers to set prices for the sale of protective clothing to end customers and imposed a fine of €783,900 for the infringement. While Pfanner's resellers were not the subject of the infringement decision, the investigation was initiated after a retailer reported the RPM to the German FCO.

Specifically, in this case, the German FCO found that the undertaking concerned and its resellers agreed that each reseller should set its resale prices (shop and online sales) at the RRP level and in no case significantly lower. This can be interpreted as setting de-facto "minimum resale prices", which competition law authorities generally consider to be an infringement. It was accompanied by a central monitoring system, mystery shopping and the tracking and censuring of contractual partners in case their sub-resellers sold the products below the RRP.

In the case of repeated and frequent or very pronounced "price dumping" or the explicit refusal to continue selling at or above the RRP, sanctions such as withholding or delay of supplies were imposed. In a number of cases, the entire supply relationship was terminated as a sanctioning measure.

This case also highlights the importance of the extra-territorial effect of antitrust law. In the present case, although Pfanner is an Austrian company that is not itself present in Germany with a subsidiary, the German FCO had jurisdiction to investigate the infringement because the RPM in question had an effect in Germany, as one of the main countries where Pfanner sold its products.

As a side note in relation to the procedural aspects: interestingly, the German FCO did not conduct a dawn raid. Rather, the investigation was carried out on the basis of official requests for information. This is a relatively new power granted to the German FCO by the 10th amendment to the German Competition Act, which entered into force in 2021. Respondents to such official requests for information are obliged to answer all factual questions truthfully, although they are not required to admit the existence of an infringement.

Companies should respond quickly and constructively to such official requests for information. In this case, Pfanner benefited from a mitigating factor as the German FCO took into account its cooperation (in addition to agreeing to a settlement).

In conclusion, vertical price fixing is still a hot antitrust topic. Even if there is no explicit enforcement or monitoring of RRPs, companies should carefully consider their relationship with resellers and distributors and how they communicate price recommendations to avoid the appearance of price fixing.