Bundeskartellamt prevents major purchasing cooperation in the furniture sector

The Bundeskartellamt has discontinued its administrative proceeding on account of the planned merger of the purchasing cooperations VME Union GmbH and KHG GmbH & Co. KG (Krieger/Höffner group) after the companies had given up their plans.

VME Union (including the MHK kitchen trade association which cooperates with VME) is the largest purchasing cooperation in the German furniture sector. In this sector, and in particular in the kitchen retail sector, the new association and KHG would together have reached market shares considerably exceeding the limits for admissible purchasing cooperations under competition law. After the Bundeskartellamt had informally informed the parties of its competition concerns and subsequent talks on possible modifications had not dispelled these concerns, the project has now been abandoned.

Andreas Mundt, President of the Bundeskartellamt: “The fact that most furniture retailers in Germany are members of purchasing cooperations is acceptable under competition law and, in view of the market structure that is mainly characterised by small and medium-sized businesses, this is a reasonable approach in order to be able to compete with “big players” such as Ikea and XXXLutz. The Bundeskartellamt is not opposed to such cooperations. However, the standards and limits applying Europe-wide to the size of cooperations must be observed. According to our preliminary findings these limits are clearly exceeded in this case. In the assessment of such cooperations we must always keep an eye on possible disadvantages for consumers and the opposite market side, i.e. in this case small and medium-sized furniture manufacturers.”

According to the relevant EU guidelines on horizontal cooperation agreements, purchasing cooperations can have anticompetitive effects if their market shares exceed 15 per cent. This would have clearly been the case here, both in the German furniture retail sector and in the kitchen and upholstered furniture sectors which were investigated separately. As furniture retailers which are members of a cooperation mainly use this cooperation to process their purchases, this would result in the alignment of a major cost factor. When selling to end customers this will lead to restrictions in competition on prices and product ranges. Via their member companies, VME, MHK and Union operate throughout the whole of Germany. The Krieger group is also generally represented in the more populous regions. Any reasons for an exemption and antitrust clearance have not been evident in the proceeding.

The parties abandoned the proposed inclusion of the Krieger group before a formal decision was issued by the Bundeskartellamt. A case summary on this proceeding will be available shortly.

As already stated when the proceeding was initiated (see press release of 24 October 2018), the Bundeskartellamt notes with concern the increasing concentration of purchasing cooperations in the furniture retail sector. The associations EMV and Garant have merged only recently. The Giga association led by the XXXLutz group has also grown significantly after the takeover of Poco and Dodenhof by XXXLutz.

A phenomenon frequently observed in retail companies and purchasing cooperations are demands for special rebates which are made after smaller competitors have been acquired or associations have been merged (e.g. “wedding rebate”, “integration bonus”, “concentration bonus”). In many cases such demands are even made during a business year within the framework of ongoing supply contracts, which means manufacturers have to worry about their products being de-listed if they do not agree to grant a special rebate. Such demands can raise competition concerns if the new company or the new association have a powerful or even dominant market position and if the demand is not based on an objectively verifiable service provided in return for the rebate.

This week the Bundeskartellamt has taken up the “75 years of XXXLutz” anniversary rebate (2020) demanded by the XXXLutz group during the business year to be granted in the amount of 7.5 per cent over two three-months periods in 2020. The authority called on the company to submit a comment.