The grocery retailer SPAR Österreichische Warenhandels AG (SPAR) has been heavily penalised for fixing resale prices – using a combination of direct price fixing and “most favoured nation” clauses. Pricing agreements are currently facing particular scrutiny from the competition authorities and this case is a timely reminder of the competition law risks.
The Austrian Supreme Court imposed a fine of €30m on SPAR for the retailer’s part in a series of agreements aimed at fixing retail prices of groceries in Austria. The infringing conduct related to 17 categories of goods (including dairy and beer) and involved:
i) Direct agreements with retailers fixing SPAR’s retail prices.
ii) Indirect moderation of competitor prices by preventing SPAR’s suppliers from offering lower supply prices to SPAR’s competitors (known as “most favoured nation”, or “MFN”, agreements) and pressurising SPAR’s suppliers to set (higher) fixed resale prices agreed with SPAR’s competitors.
This is the highest fine ever levied by the Austrian Supreme Court. A key consideration for the Court was the need to ensure a sufficient “deterrent effect”, given the size of Spar’s global turnover, but smaller companies engaging in similar conduct can also expect financial penalties.
In handing down its decision, the Court sends a clear message that resale price maintenance is considered a hardcore “by object” infringement of competition law and companies involved in such activity can expect severe sanctions. Companies should be mindful that resale price maintenance can take the form of direct fixing of resale prices (at both the retail and wholesale levels of trade), fixing of profit margins, setting of minimum resale prices and (in some instances) the use of MFN agreements. Horizontal co-ordination of prices (i.e. between competitors operating at the same level of trade) will be treated particularly severely.
The risks of appealing
The case also highlights the risks and unintended consequences that can be associated with raising appeals against the decision of a competition authority; the Austrian Competition Authority had fined Spar just €3m, it was only on SPAR’s own appeal against the Authority’s decision that the Austrian Supreme Court increased the fine by a factor of 10 to €30m.