The Investigation of the Austrian Retail Sector: Vertical Price Restraints and their Horizontal Aspects Dr. Anastasios Xeniadis Dr. Luca Schicho Austrian Federal Competition Authority 5th Competition Forum of Ukraine Kiev, 18th March 2016

Overview I.Introduction II.The Austrian food retail investigation III.The Austrian electronics and online sales investigation IV.Conclusion

I. Introduction The prohibition of RPM Resale Price Maintainance (RPM) is an agreement or concerted practice with the direct or indirect object of establishing a fixed or minimum resale price or a fixed or minimum price level to be observed by the buyer RPM is considered a “hardcore restriction” in European Competition Law, which is unlikely to be justifiable RPM cases are currently under investigation in virtually all Member States and by the European Commission, recent investigations include Germany (150 Mio in the food retail sector), Belgium (175 Mio in the personal care sector – pursued as a hub and spoke case)

I. Introduction Harmful effects of RPM RPM eliminates intra-brand price competition and facilitates collusion at the distribution level RPM undermines the incentive for the supplier to cut its price to its distributors, as the fixed resale price will prevent it from benefiting from expanded sales Manufacturers with market power may use RPM to foreclose smaller rivals, by granting superior margins to distributors Distributors with market power may use RPM to prevent more efficient rivals from entering the market or acquiring sufficient scale with low prices

I. Introduction Indirect forms of RPM fixing the maximum level of discount the distributor can grant from a prescribed price level making the grant of rebates or reimbursement of promotional costs by the supplier subject to the observance of a given price level linking the prescribed resale price to the resale prices of competitors, threats, intimidation, warnings, penalties, delay or suspension of deliveries or contract terminations in relation to observance of a given price level Price monitoring systems

II. The Austrian food retail investigation In August 2011, FCA received evidence of RPM with strong horizontal elements during an investigation 25 inspections regarding RPM in Food Sector since then Fines against 5 food retailers, including :  REWE (35% MS): € 20,8 Mio (numerous products)  SPAR (30% MS): € 30 Mio (dairy products); further case pending (including beer and non-alcoholic beverages)  Fines against 4 small retailers amounting to € 1,2 Mio  Fines against 13 suppliers amounting to € 4 Mio

II. The Austrian food retail investigation Cases involved numerous different types of behaviours: "Classical" written RPM clauses in annual agreements and correspondence on promotional sales Retailers requiring to ensure that identical or similar contemporaneous resale price increases are implemented by competing retailers (conditional for increase of purchase price) Suppliers communicating in advance time and extent of resale price increases of other retailers Suppliers monitoring and reporting to retailers on competitor's price increases Retailers exercising pressure on suppliers failing to implement identical or similar resale prices with competing retailers

III. The Austrian electronics and online sales investigation In November 2011, the Vienna University of Economics published a study concluding that 47,2% of online traders in the electronic industry felt pressure from the industry considering their price setting (based on information provided anonymously) FCA investigated and contacted selected retailers but retailers were not willing to provide any written information In Autumn 2012, two inspection orders were issued for inspections at the premises of a producer The inspections enabled the FCA to request numerous follow-on inspections throughout the industry (including retailers) Fines against 10 companies, amount to € 6,3 Mio

III. The Austrian electronics and online sales investigation Cases involved numerous different types of behaviours: "Classical" written RPM clauses Suppliers imposing penalties or rewards related to compliance with RPM, including delays in supply and refusals to supply Suppliers imposing maximum discounts for promotion activities Suppliers banning online sales for certain goods or on specific (price aggressive) online plattforms Suppliers communicating in advance time and extent of resale price increases of other retailers

IV. Conclusion RPM entails signficant harm to competition directly affecting consumers through higher prices RPM is often „traditional“ and long-established in certain sectors and considered „natural“ by many companies involved, resulting in increased opposition to enforcement, but also easier availability of evidence RPM investigations are ressource-intensive, as they typically involve a very large number of companies, but they provide important benefits to consumers and reduce entry barriers for new market participants

Overview of Austrian vertical cases KTM Fahrrad GmbH United Navigation GmbH Samsung Electronics Austria GmbH Spar Österreich-Gruppe Nikon GmbH (Zweigniederlassung Wien) Pago International GmbH Pfeiffer HandelsgmbH und die Zielpunkt GmbH Vöslauer Mineralwasser AG Brauerei Joseph Baumgartner GmbH NÖM AG MPREIS Warenvertriebs GmbH Sutterlüty Handels GmbH Austrotherm GmbH Stieglbrauerei zu Salzburg GmbH Grundig Intermedia GmbH Brauerei Hirt Gesellschaft mbH SSA Fluidra AFS Franchise-Systeme swisspor Österreich Gmbh & Co KG Braucommune in Freistadt Hans Lurf GmbH Mohrenbrauerei August Huber KG Media-Saturn BeteiligungsgmbH Pioneer Electronics Deutschland GmbH Privatbrauerei Zwettl Karl Schwarz Gesellschaft m.b.H Brauerei Schloss Eggenberg Stöhr GmbH & Co KG Vereinigte Kärntner Brauereien AG Kärntner Milch reg.GenmbH Vorarlberger Mühlen- und Mischfutterwerke GmbH Brauerei Ried e.Gen Emmi Österreich GmbH bauMax AG REWE International Philips Austria GmbH (Consumer Lifestyle) Berglandmilch eGen Steinbacher Dämmstoff GmbH Bauhaus Depot GmbH Hornbach Baumarkt GmbH OBI Bau- und Heimwerkermärkte Overall

Thank you for your attention! Austrian Competition Authority