Recommendations on prices or sales conditions
Recommendations on prices or sales conditions are actions in which a company, association, or other organization makes suggestions to third parties – especially retailers or resellers – for the setting of prices or other terms of sale of goods or services. They pertain to a central topic in antitrust and competition law and are crucial for the economic independence of market participants.
Definition and differentiation
Definition
In legal terms, recommendations on prices or sales conditions are understood as unilateral communications intended to provide the recipient with non-binding guidance for pricing or other sales conditions (e.g., discounts, payment terms, delivery terms). They differ from binding price requirements or agreements because they are, in form, declared as “non-binding.”
Distinction from binding requirements
While binding price maintenance, especially in the relationship between manufacturers and retailers, is in most cases not permitted, non-binding price recommendations (RRP) are permissible under certain conditions but must comply with specific legal requirements.
Context in commercial law
Recommendations on prices or sales conditions are of significant importance within the Act Against Restraints of Competition (GWB) and the European competition rules according to Art. 101 of the Treaty on the Functioning of the European Union (TFEU).
Legal basis
National regulations (Germany)
Act Against Restraints of Competition (GWB)
German antitrust law primarily assesses price recommendations pursuant to §§ 21 and 22 GWB. According to § 21 para. 1 GWB, companies and associations of companies are prohibited from making recommendations to third parties that are suitable to influence competition. Exceptions and limitations are regulated in § 22 GWB.
Significance of “non-binding” nature
A recommendation is only permissible if it is indeed non-binding in its structure. As soon as economic or actual coercion is exercised, such as through sanctions, “threats of withdrawal,” or other pressure tactics, this constitutes a circumvention of the prohibition set out in § 21 GWB and thus anti-competitive behavior.
Special regulations for publisher products
For publications such as books, newspapers, and magazines, different regulations apply, especially due to the Book Price Fixing Act, which provides for a binding price setting for retail sales.
European law
Art. 101 para. 1 TFEU
Under European law, recommendations on prices and sales conditions must be assessed against Art. 101 TFEU. According to this article, all agreements, decisions, and concerted practices between undertakings that may affect trade between Member States and have as their object or effect the prevention, restriction, or distortion of competition are prohibited.
Guidelines and vertical guidelines of the EU Commission
The European Commission has clarified in its so-called Vertical Guidelines to what extent and under what conditions price recommendations are deemed permissible. In particular, vertical price recommendations may not be connected with indirect or direct pressure to adhere to the recommended prices.
Permissibility and limits
Permissible recommendations
Non-binding price recommendations
Non-binding price recommendations are, in principle, permitted provided that:
- They are genuinely declared and communicated as non-binding.
- No economic pressure or incentive system exists to enforce them.
- They are not abusively used as a “benchmark” in the sense of actual price fixing.
Informative recommendations
Recommendations that provide objective market information, average prices, or – in an appropriate manner – price orientation aids are also permitted, as long as they do not restrict or influence the independent entrepreneurial decision-making scope.
Impermissible recommendations
Potential antitrust violations
Recommendations become impermissible and unlawful if
- they are linked to threats of sanctions, economic pressure, or incentives;
- they promote collusive conduct or price coordination;
- they become part of a concerted practice with other companies.
A typical issue is also the so-called “enforcement” of price recommendations through boycotts, supply restrictions, or the withdrawal of other benefits.
Practical examples and case law
Practical examples
- Automotive industry: Car manufacturers often issue RRPs that are non-binding for dealers. A binding would only be unlawful if proven pressure is applied.
- Retail chains: Recommendations about promotional prices in flyers are allowed as long as the prices are truly freely selectable.
Key judgments
- Federal Court of Justice, judgment of 13 March 2003, KVR 4/02 (“Potato market”): The Federal Court of Justice ruled that a non-binding recommendation is anti-competitive if it is accompanied by threats of sanctions.
- European Court of Justice, C-209/07 (“BAFI Kaba”): The ECJ clarified that even the attempt to enforce price recommendations may be considered a competition infringement.
Sanctions and enforcement
Sanctioning powers of the authorities
Competition authorities such as the Federal Cartel Office or the European Commission may
- initiate investigations,
- issue prohibitions,
- impose fines (up to 10% of the previous year’s turnover).
Other legal consequences
- Nullity of the impermissible price recommendation
- Claims for damages by affected companies and consumers
- Collective rights of action under § 33 GWB
Current developments and practical guidance
Digitalization and online trade
In e-commerce, dynamic price recommendations are increasingly being used (for example, through algorithmic systems). The described requirements apply here as well, regardless of the distribution channel.
Compliance measures for companies
Companies are required to ensure in their sales structures, training, and contract templates that price and condition recommendations are truly non-binding and that compliance is neither monitored nor sanctioned.
Summary
Recommendations on prices or sales conditions are in principle allowed as long as they are non-binding and not aimed at restricting free competition or undermining the pricing authority of market participants. Their limits are clearly defined by national and European regulations and are continuously developed by case law. Companies should carefully consider how they design and communicate price recommendations to avoid antitrust risks and sanctions. Proper handling of price recommendations is essential for legally compliant market practices both domestically and internationally.
Frequently asked questions
May companies issue joint price recommendations within associations or organizations?
Companies organized in associations or other groups are, as a rule, not permitted to issue joint price recommendations, as this can be considered an anti-competitive agreement under German and European antitrust law. The prohibition also applies to non-binding price recommendations if these factually serve as guidance for market conduct. An association that recommends its members to demand certain prices or conditions generally violates § 1 GWB as well as Art. 101 TFEU. Only in justified exceptional cases, such as in narrowly defined crises, may this be permissible, provided the measures are proportionate, necessary, and do not serve to further restrict competition.
How should price recommendations from manufacturers to resellers be legally assessed?
Price recommendations from manufacturers to resellers are generally allowed, as long as they are non-binding price recommendations (RRP). These RRPs must not be declared or practically enforced as fixed or minimum prices by pressure, incentives, or sanctions, because otherwise the resellers’ pricing authority would be limited. Binding requirements for prices or conditions between manufacturers and resellers are not permitted under § 1 GWB and Art. 101 TFEU, as they result in vertical price fixing, which is anti-competitive. Even de facto enforcement, such as through systematic monitoring or rewarding compliance, is considered a violation.
What risks are associated with informal price recommendations or arrangements between competitors?
Informal price recommendations or arrangements – for example, discussions about future price developments, planned conditions, or coordinated adjustments – are expressly prohibited under antitrust law. Even the exchange of sensitive competitive information such as prices and discounts may be considered coordinated conduct, regardless of whether an explicit agreement was made. This also applies to exchanges at industry meetings, working groups, or social gatherings of competitors. Antitrust authorities consider even such coordination a serious violation, which can be sanctioned with significant fines and claims for damages.
May an industry association communicate benchmark values for discounts or payment terms?
Even communicating benchmark values for discounts, payment terms, or other sales conditions by an industry association is legally problematic, as such recommendations may coordinate the members’ behavior and thereby restrict competition. The decisive factor is whether the association effectively provides a guideline to which its members adhere. Even general benchmark values or recommendations on maximum or minimum discounts usually constitute an impermissible restriction of competition.
Under what exceptions can a collective price recommendation be permitted?
Collective price recommendations may be permissible only in narrowly defined exceptional cases, such as when they are demonstrably necessary to address exceptional market disruptions, e.g., during an economic crisis or natural disaster, on a short-term basis. The prerequisites are that the price recommendation is strictly limited in time, subject, and geography, and is justified and proportionate. As a rule, express approval from the antitrust authorities must be obtained. Such exceptions are subject to strict oversight and transparency requirements.
What are the consequences of violations against the prohibition of price recommendations?
Violations of the antitrust prohibition of price recommendations and sales conditions can have serious consequences: Antitrust authorities can impose significant fines, based on the company’s turnover. In addition, there is the risk of compensation claims from affected competitors or customers. Companies and their responsible employees may under certain circumstances be held personally liable. Further consequences include reputational damage and exclusion from public contracts.
Are competitors required to disclose price or condition recommendations?
Under antitrust law, there is no obligation to disclose price recommendations or recommendations on conditions to competitors or the public. However, the sharing or coordination of such information among competitors is generally prohibited. Permissible non-binding price recommendations from a manufacturer to a reseller should be transparent, clearly identified as non-binding, and not enforced. In the event of official examinations or proceedings, affected companies must provide all relevant information on request.
