If you have not noticed already, Germany is entering a new era of (cheap) coffee. LAP’s “affordable specialty coffee” pitch has already sparked a wider debate about gentrification, investor-backed expansion, and who gets to define what neighbourhood commerce should look like. Now Cotti Coffee, a chain originally from China, is moving into major German cities with app-based pricing that can make even LAP look pricey. However, “coffee wars” are not only playing out on the street, but also in supermarket aisles and courtrooms, as a recent legal battle between Tchibo and Aldi Süd illustrates.
The facts in brief
The underlying commercial story is straightforward: It is undisputed that in 2023 and 2024, discount supermarket chain Aldi Süd repeatedly offered certain roast coffee products for one week at a time at prices that were below the products’ production costs. Coffee retailer Tchibo claimed that, depending on the product, Aldi Süd was selling at a loss of around EUR 0.20 up to EUR 3.50. Outside the promotion weeks, the same products were sold above production cost.
Why would it make sense to offer coffee at such a low price? According to one theory, it is because coffee is a product people notice and remember. Consumers compare coffee prices, and many use them as a shortcut for judging a retailer’s overall price level. Retailers know this and often use such products to draw shoppers in, relying on mixed-margin strategies where some items subsidise others.
Tchibo challenged Aldi Süd’s promotional strategy and sought an injunction against Aldi Süd. According to Tchibo, Aldi Süd was allegedly using superior market power in a way German law treats as abusive in a specific setting, a point I explain in more detail below.
One fact is particularly important: Aldi Süd did not simply buy these coffee products and resell them. The products at issue were produced within the Aldi Süd group, in its own roasting operations. (Spoiler: That vertical integration might well be the legal pivot.)
Where things stand procedurally
Tchibo lost in the first instance. The Regional Court Düsseldorf dismissed the claim on 16 January 2025 (see here). Tchibo appealed. Last week, the Higher Regional Court Düsseldorf (OLG Düsseldorf) dismissed the appeal, holding that Aldi Süd may, at least in promotional weeks, offer coffee produced within its group below production costs (see the press release). The decision is not yet final and may be appealed.
What was the legal hook?
At the centre of the case was section 20(3) of the German Act Against Restraints on Competition (GWB), a provision distinctive to German competition law. Broadly speaking, it addresses conduct by undertakings with superior market power and prohibits unfair hindrance of smaller competitors. It includes a specific rule for food retail under which selling below the Einstandspreis (purchase price) may be unlawful if the retailer has superior market power.
Aldi Süd defended itself on several levels. It disputed superior market power, stressed that German law does not contain a general ban on selling below costs, and argued that Tchibo, given its scale, is not the kind of small and medium-sized competitor Section 20(3) is meant to protect.
For assessing competitor status, what matters is the competitors’ relative size compared to the alleged abuser, not an abstract turnover threshold. For context, the first-instance judgment notes that the Tchibo group reported worldwide turnover of EUR 3.25 billion in 2022, while the Aldi Süd group reported EUR 17.9 billion in Germany alone. However, based on the press release, the court appears to have left open the usual fact-heavy issues in Section 20 cases, namely whether Aldi Süd indeed had superior market power over Tchibo and whether Tchibo falls within the protected competitor group.
Instead, the court focused on a narrower, more technical issue: Section 20(3) refers to the purchase price for a given good, meaning the price agreed with the supplier when buying the goods. But Aldi Süd did not simply buy finished coffee and resold it. Aldi Süd bought green coffee beans and had them roasted within the group before selling them. The OLG took the view that in such cases, there is no “purchase price” and thus a potential ban on selling below the purchase price does not apply.
Importantly, the court also rejected the argument that the behaviour in question could constitute a general abuse of superior market power. According to the court, just because the law contains a specific rule tied to the purchase price, this does not make selling food below production cost automatically illegal. In that context, the court held that a finding of unfair hindrance would also have required proof of intent on Aldi Süd’s part to push Tchibo out of the market. That, however, was apparently not demonstrated.
Takeaway
Going forward, pricing cases will require first a basic classification: Is the case about a straightforward resale situation, where a retailer buys products from an external supplier and sells them below its own purchase price, or does the case take place in a vertically integrated setup, where the allegation concerns “below‑cost” pricing for a product manufactured within the group?
If the case is not straightforward resale, the purchase price benchmark may fall away, and one cannot just replace it with a production-cost test. Put plainly, internal production changes the legal entry point, and “sold below costs” alone is unlikely to do the work once the retailer is vertically integrated.
It remains to be seen how the German legislator will respond to a grocery market in which the largest retailers are no longer just retailers, but increasingly also control private-label production and larger parts of the value chain.
As for the new coffee shops, it will be interesting to see how the established market players respond – whether they embrace the new competition, seek to invoke competition law, or pursue a combination of the two.
Antitrustpolitics.com 