German Bundeskartellamt hands down fine to toy producer for enforcing resale price maintainance
Today, the Bundeskartellamt has fined toy producer LEGO for enforcing vertical resale price maintenance in the sale of several so-called “highlight articles”. The comparatively low fine largely results from LEGO’s immediate, consistent and extensive cooperation with the authority as well as the implementation of further measures and does thus provide an example how a comprehensive defence strategy works even where no leniency is available.
According to the Bundeskartellamt, sales representatives of LEGO have forced retailers in northern and eastern Germany in 2012 and 2013 to raise their retail prices for certain articles: the sales representatives maintained a list with retail prices for certain LEGO products and monitored and enforced these Prices: in some cases they threatened the retailers with a reduction in or even a refusal to supply when products were sold below the prices listed or made the level of discount on the retailers’ purchase prices conditional on maintenance of the listed resale prices.
According to a LEGO press statement, the above behaviour of individual sales representatives was in violation of LEGO’s worldwide compliance program and concerned only about 20 LEGO products, a limited number of retailers and a limited geographical Region within Germany.
Still, the amount of the fine – a mere 130.000 Euro – seems to be comparatively low for a clear cut infringement. The President of the Bundeskartellamt underlined that LEGO carried out extensive inhouse investigations and from the onset significantly contributed to clarifying the facts of the case. The company also drew the necessary organizational and personnel consequences. In setting the fine full consideration was taken of its cooperation and the fact that a settlement could be reached.”
In fact, LEGO had not only started an internal investigation right after being confronted with the allegations and made the results available to the agency, but also took decisive action: measures were taken against employees involved (some were even terminated) and the worldwide compliance program was given a comprehensive overhaul, in particular by significantly intensifying and extending employee training programs.
Last but not least, LEGO has made a point to advocate a decisive “tone from the top” with CFO John Goodwin submitting that “this non-compliant behaviour […] is unacceptable and not representative of what the LEGO brand stands for” and adding “We take the non-compliant actions from the specific LEGO employees as well as the decision of the Bundeskartellamt very seriously and we have taken steps to prevent such conduct again. There should be no doubt that the LEGO Group always adheres to the laws and regulations of all countries.”
Whilst one may be tempted to ignore this case due to the rather in significant amount of the fine and the lack of novelty in terms of competition law, two points seem to be noteworthy: First, the Bundeskartellamt broadens its industry Focus to include toy makers in line with the European Commission’s current sector inquiry on cross-border online sales – setting another example for the close relationship competition authorities entertain today. Second, it may still be worthwhile to fully cooperate in a vertical case in order to bring down the amount of the fine, regardless of the fact that the Bundeskartellamt’s Leniency Program does not apply to vertical infringements and can, therefore, not provide a basis to obtain immunity from or reduction of the fine by cooperating with the agency.