On June 10, 2024, the German Federal Cartel Office (“FCO”) imposed fines of almost €16 million on AVM Computersysteme Vertriebs GmbH (“AVM”) and one of its staff representatives for vertical price fixing (so-called Resale Price Maintenance or “RPM”) with six electronics retailers.[1]
Background
AVM is one of the leading manufacturers of products for broadband connections and the digital home in Germany and Europe. Under its “FRITZ!” brand, the company manufactures and distributes wifi routers, repeaters, telephones, and smart home products.
German and European competition law prohibits manufacturers from intervening in the price setting process of their independent distributors. Retailers are supposed to compete with each other by setting their own retail prices (so-called intra-brand competition). While manufacturers may issue (non-binding) recommended retail prices, they may not attempt to influence retailers’ pricing decisions.
The proceedings were initiated by an anonymous tip-off to the FCO’s whistleblowing system and subsequent reports from market participants. This led to an initial dawn raid in February 2022, followed by a second raid in June 2023.
FCO Decision
The FCO found that AVM restricted price competition at the expense of end customers by coordinating resale prices with electronics retailers. While the coordination broadly aimed at general price increases, AVM’s sales representatives in some instances also requested specific minimum resale prices (“target prices”), ranging between AVM’s recommended retail price and the retailers’ purchase price. AVM systematically monitored retailers’ prices using in-store research, online price comparison services, and specialized monitoring software. In addition, AVM sales representatives operated a dedicated WhatsApp chat group specifically to coordinate internal responsibilities for price intervention with retailers. The coordination intensified when end customer prices fell considerably below the “target prices”, or when retailers complained about unsustainable end customer prices. In many cases, retailers agreed to raise prices following such interventions, which could include threats of delivery stops or deteriorated purchasing conditions.[2]
When determining the fine, the FCO considered AVM’s cooperation and agreement to a settlement. No fines were imposed on the involved retailers.
Conclusion
The FCO has historically taken a strict stance on RPM cases, although actions on vertical infringements are rather rare (as shown in the graphic below). In 2017, following several proceedings regarding RPM infringements in the food retail sector, the FCO published its “Guidance note on the prohibition of vertical price fixing in the brick-and-mortar food retail sector”, which outlined its enforcement policies.[3] Beyond food retail, the FCO’s scrutiny of RPM practices has extended across multiple industries in recent years. In 2021, the FCO fined Bose in a similar consumer electronics case[4] and imposed fines on manufacturers of school backpacks[5] manufacturers and distributors of musical instruments,[6] and a manufacturer of protective clothing.[7] In addition, following an investigation by the FCO, Spanish guitar manufacturer, Manufacturas Alhambra S.L., distanced itself from allegedly influencing retailers’ pricing policies for its products.[8] The FCO’s commitment to strict RPM enforcement was further demonstrated during the revision of the Vertical Block Exemption Regulation, where it strongly advocated maintaining RPM’s classification as a hardcore restriction.[9]
Source: CGSH based on FCO’s biennial reports
The AVM case reinforces the FCO’s rigorous enforcement approach in RPM cases and particularly highlights the importance of anonymous whistleblowing systems in detecting vertical infringements.
[1] FCO, Press Release of July 2, 2024, available in English here.
[2] FCO, Case Report of July 8, 2024, available in German here.
[3] FCO, Guidance note on the prohibition of vertical price fixing in the brick-and-mortar food retail sector, January 25, 2017, available in English here.
[4] FCO, Case report on Case B10-23/20, available only in German here.
[5] FCO, Case report on Case B10-26/20, available only in German here.
[6] FCO, Case report on Case B11-33/19, available only in German here.
[7] FCO, Case report on Case B10-21/21, available only in German here.
[8] FCO, Press Release of October 1, 2020, available in English here.
[9] FCO, Comments by the Federal Ministry for Economic Affairs and Energy and the Bundeskartellamt regarding the draft revised VBER and VGL as published on July 9, 2021, available in English here.