The German Federal Cartel Office (FCO) recently imposed fines of EUR 11.9 million on tyre importer Maxxis and two tyre wholesalers for operating a system that allegedly restricted price competition in the distribution of Maxxis and CST tyres in Germany. But it is more than just another RPM case. According to the FCO, the case involved a combination of margin guarantees, price monitoring and interventions aimed at maintaining resale price levels, particularly on the Tyre24 online trading platform.
At first sight, the case may look like just another resale price maintenance (RPM) case (see also here and here). But that would undersell its significance. The decision is a useful reminder that regulators increasingly assess distribution systems holistically. The focus of concerns is often not a single contractual provision but the cumulative effect of several commercial practices.
The trouble with “protecting margins”
The case originated in arrangements introduced around 2015 and 2016 under which certain wholesalers received guaranteed margins on tyre sales. According to the FCO, those arrangements were accompanied by an understanding that participating wholesalers would market the products “defensively” and refrain from acting as price leaders, particularly on Tyre24.
Margin support mechanisms are generally not uncommon in distribution systems. From an antitrust perspective, issues arise when financial incentives become linked to expectations regarding downstream pricing behaviour. The FCO’s theory of harm appears to be that, in the case at hand, the margin guarantees were not merely intended to protect profitability but also to reduce incentives for aggressive price competition.
The oldest RPM story in the book
The second strand of the decision is more ”traditional”. The FCO found that Maxxis communicated recommended resale prices, monitored market pricing and intervened where dealers deviated from the desired price level. In some cases, interventions reportedly followed complaints from other wholesalers. From 2018 onwards, the process allegedly became increasingly structured, with recommended prices being circulated, implementation periods being set and compliance subsequently being monitored on Tyre24.
Manufacturers are generally free to issue non-binding recommended prices. They may also observe publicly available market data. Compliance risks arise when recommendations cease to be recommendations and become expectations backed by monitoring, pressure or incentives. That distinction is well established. Yet it continues to generate enforcement action across Europe because businesses often underestimate how quickly a recommendation can acquire a coercive element.
Digital transparency cuts both ways
Tyre24 plays a prominent role in the FCO’s account of the case. According to the regulator, the platform provided a high degree of visibility regarding sellers, inventories and prices. This allegedly made it easier to identify pricing deviations and to implement the broader pricing strategy.
The point extends beyond the tyre industry. Digital marketplaces have dramatically increased transparency throughout supply chains. That transparency can intensify competition, but it can also make monitoring of retailers easier. Information which previously required extensive market research may now be available almost instantly. The result is a recurring compliance challenge: The more visibility suppliers have over dealer pricing, the greater the temptation to act on that information.
Dealers are not innocent bystanders
Another noteworthy feature of the decision is that the FCO did not focus exclusively on the supplier. The regulator also fined wholesalers that allegedly pushed for the margin guarantee arrangements and benefited from them. According to the FCO, the initial agreements emerged in response to economic pressure from certain wholesalers, which were also significant recipients of compensation payments.
That is an important reminder. Discussions of RPM frequently focus on manufacturers. In practice, however, dealer complaints about aggressive pricing often provide the starting point for problematic conduct. Competition regulators are increasingly prepared to scrutinise both sides of the relationship.
A vertical case with an M&A angle
The decision also contains a useful lesson (or reminder) with regard to liability of legal successors. One of the fined companies was held responsible for continuing the conduct of its predecessor after an acquisition. The FCO relied on established German case law under which a legal successor may inherit antitrust liability where unlawful conduct is continued following the transaction.
This aspect of the case is a timely reminder that antitrust due diligence should not focus exclusively on hard-core cartel risks. Distribution systems, dealer-management practices and pricing arrangements can also create significant exposure.
The bigger picture
What makes the decision noteworthy is that none of the individual elements appears particularly unusual. Margin support schemes, recommended resale prices, price monitoring and dealer communications are all common features of modern distribution systems.
The problem was how these elements interacted. Viewed separately, each measure may have seemed commercially rational. Viewed together, they allegedly formed a system that discouraged aggressive price competition and stabilised resale prices. That is why the decision deserves attention beyond the tyre sector.
Photo from Anshul Gurjar on Unsplash
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