Post on 24-Dec-2015
transcript
Hub & Spoke Arrangements: A Comparative View
A view from Germany byThomas Lübbig, Berlin
15 November 2010
Contents
Germany: a retail market of its own
Strong enforcement priority on resale price maintenance, typically vertical cases, no established case law on Hub & Spoke
Current investigation into food retail by German Federal Cartel Office is shaking up the market
The OTC experienceYou won‘t find it
cheaper anywhere else!
Shelf space management revisited
It‘s all about communication
Again:
It‘s your margin you are eating
into ...
Current case law on Vertical Restraints
8 January 2008: decision against trade associations of OTC drug companies and Pharmacy Federation for organising seminars at which pharmacists were encouraged to shy away from retail price competition (moderate fine of € 465,000)
8 April 2009: fine against Microsoft for agreeing retail prices for “Office Home & Student 2007” software with retailer on at least two occasions (fine of € 9 million)
15 October 2009: fine against Phonak (Swiss hearing aid manufacturer) for systematically monitoring and hunting down price cuts by internet distributors (fine of € 4.2 million)
25 September 2009: Fine against CIBA Vision (contact lense manufacturer) for interfering with internet sales including Ebay sales as well as “agreeing” retail price maintenance with individual resellers by offering incentives or rewards (fine of € 11.5 million)
No clear position on Hub & Spoke in previous case law as focus was always on bilateral vertical agreements
Obiter dictum in CIBA Vision case whereby a concerted practice on a horizontal level between distributors could be achieved via the hub of the manufacturer, but ultimately left open
The January 2010 Big Bang
14 January 2010: comprehensive dawn raid of four food manufacturers and eleven retailers by German Federal Cartel Office Targets of the Investigation:
alleged vertical restraints: rewards for compliance or punishment for non-compliance with recommended resale prices
alleged Hub & Spoke practices with regard to price increases for FMCG products
highly controversial intervention by German Federal Cartel Office with established practice of communication between manufacturers and retailers in food distribution
“Preliminary advice” to companies cooperating with the German Federal Cartel Office
Establishment of a „black“ and a „grey“ list, the grey list outlining practices that would not be seen as a violation of the law on a stand-alone basis, but could become an issue in combination with other objectionable practices
Interim Guidance letter of 13 April 2010 by the FCO
Black List
Clear-cut agreement of resale prices or minimum retail prices
Carrot and stick policies used by manufacturers to ensure compliance by retailers with recommended resale prices
Grey List
Raising the issue of recommended resale prices over and over again with retailers and proactively discussing price cuts below the level of recommended retail prices
Coordinated monitoring of resale price discipline by manufacturers and retailers
Sending of cash receipts to retailer as proof of general compliance with recommended resale prices
Printing of recommended resale prices on food packaging if practised in combination with other elements of retail price maintenance policy
Clear identification of Hub & Spoke practices as a means of horizontal coordination between retailers
General stance of German Federal Cartel Office against “Preispflege”
“Preispflege“, translated as price maintenance policies - a collection of commercial tools taught at business school in order to avoid “value destruction“
“Preispflege“ could be popular where there is a meeting of minds between a manufacturer interested in the universal resale of its products at a high margin, and a retailer interested in general resale price stability
Outlook on current investigation by Federal Cartel Office
The Federal Cartel Office has publicly confirmed that it is only interested in the most severe practices of resale price maintenance agreement, and would not go after a stand-alone incident of a manufacturer resending its price list three times in a year
Investigation seems to be focused on bilateral vertical issues, it may be further extended to Hub & Spoke situations, but that does not seem to be the primary concern of the authority at the moment
© Freshfields Bruckhaus Deringer LLP 2010
This material is for general information only and is not intended to provide legal advice.