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Lego Germany fined for preventing discounts

Lego's German subsidiary has been fined €130,000 by the Federal Cartel Office (FCO), Germany's federal competition authority, for preventing shops from offering discounts on its products.13 Jan 2016

Retailers in northern and eastern Germany were forced by Lego's sales representatives to raise the prices some Lego's products, the FCO said.

Lego kept regularly updated lists of the products concerned and the names of the retailers. Some retailers were threatened with a reduction of supply, or even refusal to supply, if they set prices below that set by Lego, while others were told that their purchase discounts were conditional on maintaining resale prices, the competition authority said.

The FCO's order imposing the fine can be appealed to the Düsseldorf higher regional court, the FCO said. However, Lego said that it accepts the decision of the competition authority.

The FCO proceedings followed an internal investigation that Lego itself initiated in February 2014, the company said.

Individual members of the sales team in one region of Germany did not follow the group's compliance guidelines in 2012 and 2013, Lego said. The incidents involved a limited number of retailers and around 20 products, it said. Lego's internal investigation found that there was no impact on the general consumer price.

Some employees are no longer with the company, and a training programme has been put in place on compliance with competition rules, the company said.

Lego's chief financial officer John Goodwin said: "While this non-compliant behaviour only involved a small number of employees in a restricted part of Germany, we want to make it clear that it is unacceptable and not representative of what the Lego brand stands for."

Andreas Mundt, president of the FCO, said: "After the proceeding was opened Lego carried out extensive inhouse investigations and from the onset significantly contributed to clarifying the facts of the case. The company also drew the necessary organisational and personnel consequences. In setting the fine full consideration was taken of its cooperation and the fact that a settlement could be reached."

Competition expert Guy Lougher of Pinsent Masons, the law firm behind, said: "The Lego fine is simply another reminder of the long-established legal principle that within the EU a supplier must not seek to fix its distributors' resale prices, or seek to set a minimum price above which its products must be resold by distributors. This prohibition on resale price maintenance by a supplier applies equally to internet sales as it does to sales through bricks and mortar outlets."