According to the competition rules, a distributor must be able to determine its resale prices independently. It is illegal for a manufacturer to dictate resale prices for independent distributors.
RECOMMENDED PRICES OR MINIMUM PRICES?
On 7 May 2021, the Court of Aalborg ruled that the clothing company Fusion ApS has illegally fixed binding resale prices for a distributor.
The judgment by the Court of Aalborg shows that a managerial employee at Fusion ApS wrote the following to a distributor in an e-mail of 14 September 2017:
"… I’m writing to stress that we have a very hard time handling/accepting your low prices on fusion products on the website. We would very much like to sell products to you, and we are thrilled about all your activities, but low prices are extremely destructive to us!
The consequence is that we may have to stop our cooperation with Web customers as this part of our customers accounts for a very small part of our turnover but creates a lot of noise. We have to find a solution to this …"
On 19 December 2017, the employee wrote again to the distributor about the pricing:
"… I can see that you have once again chosen to sell our products at a heavily reduced price. Checking up on it, your business with our products, when sold with 25 % discount, is so minimal that it’s not worthwhile.
I have therefore decided to close your account to prevent more untenable situations from occurring ...”
The Court found that Fusion ApS had thus demanded that Fusion ApS' recommended prices be used as minimum prices, and that Fusion had thereby violated the Competition Act.
It had not been proved that the same demands were made on other distributors.
FINE LEVEL: SERIOUS RESTRICTION OF COMPETITION
The fine level for less serious violations of the Competition Act is generally up to DKK 4 mill., whereas the fine level for a serious restriction of competition ranges from DKK 4 mill. to DKK 20 mill.
It is a serious restriction of competition when a manufacturer fixes binding resale prices for its distributors. This has manifested itself in recent years in a number of cases about binding resale prices. For example, Opel Danmark A/S was fined DKK 8.25 mill. in 2016, and in 2017 Olympus Danmark A/S was fined DKK 3.6 mill., and most recently GUBI A/S was fined DKK 6 mill. in 2020.
There are also examples of cases where the fine level for binding resale prices has been lower. In those cases, the violations have generally occurred for a short period between DKK 8 mill. and 1.5 years.
Fusion ApS has been fined DKK 500,000. When fixing the fine, the Court has as an aggravating circumstance given weight to the fact that the actions were made by a managerial employee at Fusion ApS. As a mitigating circumstance, the court emphasises that the violation only took place vis-à-vis one distributor and for a relatively short period.
The managerial employee at Fusion ApS was fined DKK 50,000.
DOES YOUR COMPANY COMPLY WITH THE COMPETITION ACT?
Horten’s Competition test provides you with a clear overview that can help you assess whether your company is compliant. Take the test here (in Danish): Competition test.