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Publication

FCO examines potential discrimination against online retailers

Locations

Germany

In early 2021 the Federal Cartel Office (FCO) initiated proceedings against Liebherr-Hausgeräte Vertriebs- und Service GmbH based on complaints raised by market participants over certain clauses of Liebherr's new distribution model, which was introduced at the beginning of 2021.

The FCO examined whether the terms and conditions of sale discriminated against online retailers. Following the FCO's intervention, Liebherr agreed to delete or adapt certain clauses. Consequently, the FCO terminated its proceedings against Liebherr.
 

Background

Liebherr, based in Ulm, is a production, sales and service company for Liebherr household appliances in Germany. Liebherr has a particularly important market position in freezers and refrigerated wine cabinets.
 

Allegation: discrimination against online and hybrid retailers

According to the FCO's preliminary findings, Liebherr included clauses in its new sales model that were likely to disadvantage online retailers.

Liebherr products are mainly sold through a selective distribution system via authorised dealers. At the beginning of 2021, Liebherr introduced a new sales contract including a new rebate scheme. Liebherr had linked this rebate to online dealers to significantly higher performance requirements compared with stationary dealers.

Online retailers had to meet higher requirements for their (online) stores, such as:

  • the availability of staff on Sundays and public holidays between 9:00am and 8:00pm;
  • the delivery time for ordered goods not in stock at the retailer; and
  • the offer of certain payment methods.

In addition, Liebherr had linked the granting of rebates to hybrid dealers (ie, dealers which operate an online store in addition to a brick-and-mortar store) on meeting the criteria for both online and offline stores. The FCO considered this a discriminating practice.

According to the FCO's preliminary findings, the new Liebherr distribution model in this respect was likely to reduce the economic attractiveness of the more price-active internet distribution and weaken intra-brand competition between dealers of Liebherr equipment.

However, the FCO did not object to the remaining elements of the new Liebherr distribution agreement, such as the criteria for authorising dealers. Similarly, Liebherr's reduction of the number of German retail outlets by at least approximately 5% since 2021 gave no rise to competition concerns.

FCO President Andreas Mundt stated that:

"Brand manufacturers such as Liebherr can define quality requirements to be met by retailers who sell their products. Following complaints from market participants, however, we ascertained that in some cases Liebherr set considerably stricter requirements for online sales than for offline sales, which retailers had to meet to qualify for rebates. Retailers who use both distribution channels and do not meet the strict online requirements risk losing the rebate for brick-and-mortar sales as well. Such clauses can substantially impair the attractiveness of online sales and even cause some retailers to cease their online activities altogether. From a competition law point of view this is unacceptable. Upon our intervention Liebherr adjusted the criteria in question and made them more flexible. Consumers will thus still be able in the future to benefit from active price competition between retailers, both online and offline."
 

Proceedings

The proceedings were triggered by several complaints raised by market participants. The FCO's competition concerns were dispelled by the fact that Liebherr had agreed to:

  • adjust the online performance criteria to those applicable to brick-and-mortar stores; and
  • make availability times more flexible on a weekly basis.

In addition, Liebherr undertook to inform the rejected retailers in writing of the reasons for this selection decision. Subsequently, the FCO terminated the proceedings.
 

Comment

The FCO continues to take action against discriminatory online restrictions in selective distribution systems for branded products. The requirements for online distribution systems to be permissible under antitrust law have increased at both the national and European level and have become the focus of the competition authorities. The European legal framework is currently being reviewed as part of the revision of the block exemption regulation for vertical agreements in 2022. Against this background, it is all the more important that companies review their online distribution systems and adapt them to the increased antitrust requirements in order to avoid complaints from retailers and investigations by the competition authorities.

For further information please see the FCO's press release of 12 April, 2021.

 

Links

FCO's press release of 12 April, 2021

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