German Supreme Court quashed Higher Regional Court of Düsseldorf’s judgement that had sextupled Rossmann’s Federal Cartel Office cartel fine

On 31 July 2019, the Supreme Court (here) quashed the decision of the Higher Regional Court of Düsseldorf, which had increased the fine for retailer Rossmann from EUR 5.25 million to EUR 30 million on the basis of vertical price agreements in the sale of roasted coffee, and referred it back for a new decision.  A formal error caused the annulment and referral: The grounds of the Higher Regional Court Düsseldorf’s judgement were not placed on file in due time after the judgement had been delivered at the end of the main oral hearing.

The Supreme Court only marginally commented on issues of substance as the formal error is a so-called absolute ground for appeal, which results in the judgement being set aside in its entirety.  Rossmann had argued that the limitation period for the cartel infringement had already expired.  The Supreme Court confirmed the Court of Appeal’s finding that there had been a single and continuous cartel infringement, consisting of a basic agreement and acts of implementation.  According to the findings of the Higher Regional Court of Düsseldorf, the infringement had not yet ended by February 2008.  The decision of the Higher Regional Court of Düsseldorf of February 28, 2018 had therefore interrupted the (10 years) statute of limitations in due time.
However, the Supreme Court did not comment on the calculation of the fine by the Higher Regional Court of Düsseldorf that had led to a six-times higher fine than the fine originally imposed by the Federal Cartel Office.

In 2016, the German Federal Cartel Office found that roasted coffee manufacturer Melitta and several retailers had entered into vertical price agreements between 2004 and 2008 to maintain a minimum level of retail prices for roasted coffee products, and had imposed fines of EUR 5.25 million on Rossmann (see the case summary in German here )
While all other parties settled the proceedings with the Federal Cartel Office, Rossmann appealed the fine.

In 2018, the Higher Regional Court of Düsseldorf increased the fine against Rossmann to EUR 30 million (Case No. 4 Kart 3/17 OWi, here ). In calculating the fine, the court took the group-wide turnover as the basis instead of the turnover involved in the infringement, which the Federal Cartel Office is using for the calculation, and assessed the severity of the act and the guilt level. Rossmann then appealed to the Supreme Court.

 

 

Bundeskartellamt’s settlement with Amazon in abuse of dominance proceedings

On July 17, 2019 the BKartA announced the settlement with Amazon and closed the abuse of dominance proceedings. Besides a press release (here), it also published a case summary (here). On the same day, the European Commission opened an investigation into possible anti-competitive conduct of Amazon (here).

Heinz & Zagrosek has been representing a dealer of sewing machines as complainant in the German proceedings.

The BKartA investigated Amazon’s liability provisions; termination and blocking of seller accounts; court of jurisdiction (competent court only in Luxembourg); returns and reimbursement; product information and rights of use; confidentiality; transparency; product reviews and seller ratings; etc.

The fact that the BKartA could convince Amazon to change and amend its t&cs in a relatively short period (compared to other abuse of dominance proceedings the case has been closed within ca. 7 months) is very positive.  It is quite remarkable that the FCO could obtain a global solution, i.e., not only limited to Germany, the territory of its jurisdiction. The amendments seem to cover most of the complaint topics, but of course it will be crucial how Amazon will implement these promised changes in reality. The devil may well be in the details in this respect, and the FCO is willing to reopen proceedings should Amazon fall short of properly implementing the changes.

In Germany, the proceedings were not predominantly about its dual role as platform provider and dealer – that is now the subject of the European Commission proceedings – but more about exploitative abuse of dealers active on the platform through imposing unfair trading terms.

But the case also involved impeding and foreclosing dealers, in particular through leveraging its dominant platform position into its own retail sales: Amazon only allows product reviews to be posted on its platform if generated by its own “Amazon Vine” service, not by third-party review service providers. At the same time, it prevents platform dealers from using the Vine service, which is only available for suppliers of Amazon’s own retail activities (vendors).

Here Amazon has now promised to grant access to the Amazon Vine service to more dealers and offer services for the review of new products, which is very positive. However, the BKartA did not decide on how to deal with Amazon prohibiting the posting of product reviews from third-party services and the retroactive deletion of already posted reviews, which also formed part of complaint and concerns legitimate investments made by dealers in this area. The BKartA did obviously not want to hold up the overall informal “settlement” package and therefore refrained from reviewing these aspects in depth.  Instead, it will await the results of the currently ongoing user review sector inquiry (see our blog here), which also touches upon the subject. The topic is still very important for online dealers. The devil may well be in the details in this respect, and the BKartA is willing to reopen proceedings should Amazon fall short of properly implementing the changes.

It is not unusual that the national competition agencies and the European Commission coordinate the scope and timing of their proceedings – given that there are parallel competences in applying EU competition law, while the Commission may ultimately take over a case. Here it was efficient to coordinate the substance, so as to avoid the agencies reviewing the same questions in substance.

Heinz & Zagrosek has been mentioned and also cited in Juve (here) and GCR (here) in connection with the settlement of the German abuse proceedings against Amazon.

German Federal Cartel Office launches consumer protection sector inquiry into user reviews on the Internet

German Federal Cartel Office launches consumer protection sector inquiry into user reviews on the Internet (press release of 23.5.2019) (see here).

Online user reviews can refer to products such as sewing machines brand XY or service providers such as retailers and doctors.  User reviews on online platforms distinguish between open and closed review systems.  A characteristic feature of an open system is that users can also provide an online review if they have not purchased the product or service via the platform.  A closed review system, on the other hand, requires a transaction on the platform.

With the sector inquiry, the FCO is using an instrument for consumer protection that has been available to the authority since mid-2017. After the areas Smart TVs (see here) and comparison portals (see here) it is the FCO’s third sector inquiry based on its new consumer protection competence.

In contrast to the sector inquiry based on competition law, the FCO’s measures on consumer protection are limited to the publication of a final report.  It does not initiate any procedures, but merely identifies abusive practices.

The FCO is not the only European competition authority looking into the subject of online user reviews. As early as 2015, the Competition & Markets Authority (CMA) published a report on “Online Reviews and Endorsements” (see here). The CMA dealt extensively with the subject of “fake reviews” and described examples of abusive practices.  The authority also stressed the importance of user reviews for consumers’ purchasing decisions.  More than half of UK citizens would actively consider user reviews.

The issue of online user reviews is also discussed at EU level.  With a new directive, the EU wants to strengthen the rights of consumers in the area of online commerce and ensure greater transparency in connection with online user reviews (see here). English version is available: https://www.consilium.europa.eu/media/38907/st08021-en19.pdf 

In addition, the FCO is currently investigating in administrative proceedings whether Amazon is abusing is dominant position regarding product reviews on a possible market for marketplace services for online sales to consumers. (see here). Moreover, the FCO stated in its final report on the consumer protection sector inquiry in the area of comparison portals that user reviews regularly only came from users who successfully completed a transaction via the comparison portal (see here and see here) , exclusively in German). The FCO concluded that this restriction would make fake reviews more difficult, but it would also limit the “spectrum of reviews” of online user reviews.

The initiation of the sector inquiry on the subject of user reviews on the Internet is a further step which illustrates the FCO’s focus on the Internet industry and a topic which has relevance both in terms of competition law and consumer protection law.  It would therefore be desirable for the investigation to also deal – like the CMA – with competition law aspects of user reviews (e.g., the pro-competitive effect), which can then be used in competition law proceedings where the authority has more extensive powers.

The next measures are likely that the FCO is going to send questionnaires to market participants and consumer protection organizations.  The presentation of the results will be followed by a consultation phase during which interested market participants and other interested parties will have the opportunity to comment on the consultation paper.  Subsequently, the FCO will publish a final report.  Further measures, such as the remedying of any legal infringements by official measures, are not provided for by law.

There is no dedicated time frame for carrying out consumer protection sector inquiries.  In comparison portals, the FCO needed approx. 19 months for the entire sector inquiry.  In SmartTVs, the sector inquiry was initiated about 19 months ago and its conclusion is announced for 2019.  Results in the form of a final report on the sector inquiry on user reviews on the Internet are therefore not expected before the end of 2020 or rather mid-2021.