The Krieger/Höffner Group (KHG) can join Begros furniture purchasing cooperation after extensive modifications to its plans

KHG GmbH & Co. KG, Schönefeld (Krieger/Höffner Group) can join the furniture purchasing cooperation, Bedarfsgüter Großhandelsgesellschaft für Wohnung GmbH, Oberhausen (Begros). The Bundeskartellamt initially had competition concerns about the project which the participating companies were able to dispel by extensively modifying their original plans. The large Begros members Porta and KHG will not sell the same Begros brands for several years.

Andreas Mundt, President of the Bundeskartellamt: “Purchasing cooperations between small and medium-sized companies are accepted business models, not only in the furniture sector. These can help to offset the disadvantages small companies have compared to their large competitors. However, in the furniture market we constantly reach the limits of what is possible under competition law. As the market is already highly concentrated we have to make sure that any further concentration does not have adverse effects on suppliers and consumers. Based on the companies’ original plans, limits would have been exceeded in this case in some regions in Eastern Germany. With their several large furniture stores both Begros member Porta and KHG have significant market positions. Restricting competition between these two retailers would result in less choice for customers. Our concerns were eliminated by the companies' decision to split the own-brands of the purchasing cooperation Begros between Porta and KHG”.

Begros is one of the leading furniture purchasing cooperations in Germany. Its 16 member companies operate large furniture stores throughout Germany and to some extent in neighbouring countries as well as discount stores and online shops. A substantial share of their furniture range carries Begros’s own brands such as MONDO or Vito. In addition, Begros also provides its members with services in marketing, goods imports, product development, central settlement and del credere.

KHG is one of the leading furniture retailers in Germany with over 30 large furniture stores and over 20 discount stores as well as several online shops. Until now it has not been a member of a purchasing cooperation. The company abandoned its plans to join the purchasing cooperation VME Union GmbH in 2019 because of concerns expressed by the Bundeskartellamt (see Press Release of 12 September 2019).

According to the relevant EU guidelines on horizontal cooperation agreements, purchasing cooperations can have anticompetitive effects if their market shares on the procurement or sales side of the market exceed 15%. In the present case the focus lay on the sales markets and not the supply side. Here the 15% limit is clearly exceeded in several regional sales markets in Eastern Germany where Porta with its large furniture stores and the discounter SB-Möbel Boss has a significant market position. The same goes for KHG with its furniture stores Höffner, Kraft and Mahler as well as its discount line Sconto. Joint purchasing would have likely resulted in an alignment of procurement costs and product ranges. This would have indirectly restricted competition between Porta and KHG on the eastern German sales markets and limited choice for consumers.

However, the parties have modified their original plans by splitting Begros's own brands between Porta and KHG (so-called two brand families model). Accordingly, for several years certain Begros brands will only be sold by Porta and certain others only by KHG. Exclusive models may also only be sold either under the one or other brand family. The other Begros members will be allowed to use all Begros’s own brands. The two brand families model will significantly reduce the alignment of costs and product range as a result of KHG’s membership of the cooperation. Own-brand products account for a substantial share of the Begros members’ product ranges and turnover. In addition, after joining the cooperation KHG will not make its previous purchasing conditions known to Begros and its members. Based on these changes the Bundeskartellamt has decided not to continue the proceedings.

The Bundeskartellamt will observe the future development of the furniture procurement and sales markets in Germany. Should circumstances change significantly, the authority reserves the right to initiate a new proceeding.

A detailed case summary on this proceeding will be available shortly