Across Europe, we are seeing an increasing focus on vertical agreements, particularly those that restrict or disadvantage online sales. The German Federal Cartel Office (“Bundeskartellamt”) is particularly active in this area, most recently bringing action against toy manufacturer, LEGO in response to complaints by retailers about discrimination against online sales.
Rebates for online sales
LEGO’s rebate scheme operated so that the maximum discount was only available for sales by retailers through their high street shops. In particular, several rebates were made conditional on criteria which applied exclusively to offline sales, e.g. the number of metres of available shelf space that were reserved for LEGO products.
There was no equivalent for online sales; only the retailers that sold via bricks and mortar stores could benefit from the highest number of discount points, leaving online traders at a competitive disadvantage compared to their high street competitors.
Change to terms and conditions
LEGO has now announced that it will introduce alternative or additional discount criteria for online sales, to end the discrimination between sales channels. As a result, the Bundeskartellamt has terminated the proceedings, but has demonstrated once again that it will continue its efforts to protect online sales and combat discriminating discount systems.
Key focus in Germany
The LEGO case is just the latest in a series of German proceedings against companies that have tried to impede online sales or even benefit offline over online sales. In 2011, the Bundeskartellamt forced bathroom appliances manufacturer, Dornbracht, to modify its specialised trade agreement with wholesalers. The rebate scheme granted certain rebates exclusively to sales in high street stores.
Proceedings against Bosch Siemens Hausgeräte in 2013 (for putting hybrid dealers that were more active online at a disadvantage regarding rebates), and sports shoe manufacturer Asics in 2015 (for restrictions of online sales by various means) further showcase the German antitrust enforcer’s persistence in protecting online competition.
Implications for business
The LEGO case is also an important reminder of the importance of equivalence in online and offline criteria. It is possible to set different criteria for online sales, however these must be equivalent to offline criteria and should not discriminate against the online channel.