Million-dollar fine imposed on Bose

The German company Bose must pay a fine of seven million euros due to vertical price fixing. The fine was imposed by the German Federal Cartel Office. The fine notice is now legally binding, so there is no longer any possibility of contesting it.

What happened?

Bose is alleged to have entered into agreements over a period of years with companies that sold its products to end consumers. In doing so, it is said to have ensured that the companies did not deviate significantly from the recommended retail price with their called sales prices. Compliance with these agreements was allegedly monitored by Bose employees. In the event of violations by the retail companies, the audio product manufacturer intervened.

The retail companies with which Bose had made such agreements also seemed very interested in compliance: In the event of deviations, complaints were reportedly made to Bose by the other companies. The proceedings ultimately came about as a result of a request for administrative assistance from the competent Austrian authority.

Vertical price fixing?

The vertical price maintenance offense denounced involves agreements that result in a specific product being offered at fixed prices in retail outlets. The pricing competence of retail companies is curtailed in favor of the manufacturer’s specifications, and end customers do not benefit from free competition between individual suppliers.

This practice has been banned in Germany since 1974 – but not completely. In the case of books, for example, fixed prices are prescribed by law. In theory, the ban on fixed prices is intended to promote competition, which should have an overall positive effect on economic performance and, incidentally, enable low prices for end customers. In practice, the ban on fixed prices opens the door to a price war that is detrimental to working conditions and, in case of doubt, leads to dominant market positions with all their disadvantages.

The reason why companies such as Bose are interested in the binding specification of retail prices is that this allows the company to control its image to a large extent itself and, in addition, it does not run the risk of becoming dependent on the few companies that prevail in a price war.

Despite the ban, the practice is still widespread. In recent years, for example, penalties have been imposed on the LEGO Group, on Peek & Cloppenburg, on other manufacturers of audio products, and on manufacturers of school bags.