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Expensive pricing practices

July 2011 - EU & Competition. Legal Developments by Norrbom Vinding Law Firm, member of ius laboris.

More articles by this firm.

A furniture manufacturer dictated the price of its designer furniture. Both the company and its management were made to pay for this.

It is contrary to the Danish Competition Act for manufacturers to fix retail prices because it may weaken competition. This will not benefit consumers. And, as a furniture manufacturer found to its cost, it is also contrary to the Danish Competition Act to prohibit retailers from advertising the products at reduced prices.
‚ÄėWe encourage you from now on to only label, display and, if necessary, advertise our recommended retail prices‚Äô. This was the robust message from a furniture manufacturer to its retailers.
For a period of 4 years, the manufacturer tried via emails and letters to make its retailers maintain the high price of 2 expensive designer chairs. In its attempt to keep up prices, the manufacturer also ordered the retailers not to advertise the furniture at reduced prices from time to time, and threatened to reconsider its advertising subsidies.
Visit by the competition authorities
The irregularities were discovered when the Danish Competition Authority paid a visit to the furniture manufacturer. The Authority found a number of emails which made it report the matter to the State Prosecutor for Serious Economic Crime, who later brought proceedings against the manufacturer for anti-competitive practices.
The manufacturer argued that the retailers would always fix the retail price by themselves and that the prohibition against advertising the furniture at reduced prices was only to be taken as a recommendation.
Witness testimony from a number of furniture retailers supported the manufacturer’s defence. They had fixed their own prices independently of the manufacturer.
Even so, the district court decided to impose a EUR 67 000 fine on the manufacturer, having regard to the fact that these were serious breaches of the Danish Competition Act over a long period of time. The CEO and the marketing manager were fined about EUR 3 400 each.
Norrbom Vinding notes:
  • that it can be inferred from the grounds of the judgment that the fines could have been even higher if the prosecutor had been able to prove that the offences had actually had any market effects; and

  • that the judgment is in line with the special focus that the Danish Competition Authority (now the Danish Competition and Consumer Authority) is currently putting on manufacturers of Danish furniture classics.
The above does not constitute legal advice and should not be relied upon as such

For more information please visit www.norrbomvinding.com