On January 19, 2022, the German Federal Cartel Office (“FCO”) closed its proceedings on furniture retailer KHG GmbH & Co. KG’s (Krieger/Höffner Group, “KHG”) envisaged accession to the purchasing cooperation Bedarfsgüter Großhandelsgesellschaft für Wohnung GmbH (“Begros”) which it had initiated in early 2021.  In the end, KHG and Begros were able to dispel the FCO’s concerns by offering substantial modifications to their initial plans.[1]

Begros is one of the leading furniture purchasing cooperations in Germany.  Its 16 members (including in particular the Porta Group) operate large furniture stores throughout Germany and to some extent in neighboring countries as well as discount stores (including in particular Porta’s SB-Möbel Boss stores) and online shops.  A substantial share of their furniture range consists of Begros’s own brands such as MONDO or Vito.[2]

KHG is one of the leading furniture retailers in Germany with more than 30 large furniture stores (including the Höffner, Kraft and Mahler brands) and more than 20 discount stores under the Sconto brand as well as several online shops.  Until now, KHG has not been a member of a purchasing cooperation.[3]

Under EU and German antitrust law, there is no absolute threshold above which it can be presumed that the parties to a joint purchasing arrangement have market power so that the joint purchasing arrangement is likely to give rise to restrictive effects on competition.  However, in the European Commission’s and FCO’s view, it is considered unlikely that market power exists if the parties to the joint purchasing arrangement have a combined market share not exceeding 15% on the purchasing market(s) and on the selling market(s).

During its investigation, the FCO focused on the selling markets and found that the accession of KHG to Begros would lead to market shares clearly exceeding 15% in nine local selling markets in eastern Germany where Porta and KHG both have significant market positions.[4]  Further, the FCO found that joint purchasing by KHG and Begros would have likely resulted in an alignment of procurement costs and product ranges leading to restrictions in price and assortment competition between Porta and KHG to the detriment of consumers.

To eliminate the FCO’s concerns, KHG and Begros offered to substantially modify their initial plans.  In particular, KHG and Begros offered to apply a so-called “two brand families model”, under which certain Begros proprietary brands will (for several years) only be sold by Porta whereas others will only be sold by KHG.[5]  Further, Begros may only purchase and sell exclusive models either under the one or under the other brand family.  Because Begros’s proprietary brands account for a significant part of the furniture range and turnover of its members, this concept significantly reduces the risk of an alignment of costs and product ranges.  Finally, KHG undertook to keep its previous purchasing conditions confidential from Begros.  The FCO considered the parties’ commitments suitable to dispel its concerns.  Nevertheless, the FCO stressed that it will closely monitor the German furniture markets and KHG’s and Begros’s compliance with the commitments.

While the above shows that the FCO will carefully scrutinize purchasing cooperations, in particular where these involve larger market players and a close coordination of the economic behavior of the companies involved, the FCO is less concerned about horizontal cooperation between smaller competitors which combine forces to counterbalance market power of their contractors.  In this vein, the FCO recently expressed no concerns regarding the collective legal assessment and negotiation of purchasing terms and conditions by an association of 39 small (often family-run) breweries (“Die Freien Brauer” – The Free Breweries).[6]  The members of the association have a combined German-wide market share of less than 5%.  The FCO stressed that the cooperation rather resembles an outsourced legal department to assess the terms and conditions unilaterally dictated by food retailers, which, however, helps its members to assert themselves against food retailers and thereby to compensate competitive advantages of large breweries.  Further, the breweries will continue to negotiate specific conditions such as prices and sales volumes individually.

[1]              Case B1-198/20.  The FCO’s Press Release of January 20, 2022 is available in English here; the FCO’s Case Summary of February 15, 2022 is only available in German here.

[2]              In addition, Begros also provides its members with services in marketing, goods imports, product development, central settlement and del credere.

[3]              In 2019, KHG refrained from joining the purchasing cooperation VME Union GmbH after the FCO had expressed significant competition concerns—FCO case B1-229/18; see the FCO’s Press Release of September 12, 2019, available in English here and the FCO’s Case Summary of October 18, 2019, only available in German here; see also our Antitrust Watch blog article of September 12, 2019, available here.

[4]              While the FCO did not investigate exhaustively the purchasing markets, it pointed out that the results of its investigations indicated that the purchasing markets are even wider than Germany in geographic scope and thus wider than the (regional) selling markets.  Accordingly, the FCO concluded that the market shares of Begros and KHG on any potentially relevant purchasing market would presumably be lower than on the selling markets.  After all, considering the parties’ commitments, the FCO abstained from defining the relevant purchasing market(s) and from a final assessment of the competitive effects of KHG’s cooperation with Begros on these market(s).

[5]              Other Begros members will be allowed to jointly purchase and sell all Begros proprietary brands with Porta and/or KHG.

[6]              The FCO’s Press Release of March 24, 2022 is available in English here.