German Federal Cartel Office approves Purchasing Cooperation of Warsteiner and Karlsberg – Relevance for Switzerland

On 14 December 2022, the German Federal Cartel Office cleared the establishment of a purchasing joint venture by the well-known breweries Warsteiner and Karlsberg. It considered the project to be unproblematic from a merger control and antitrust perspective. This decision is also relevant for Switzerland.

Background

Warsteiner Brauerei Haus Cramer KG (Warsteiner) and Karlsberg Holding GmbH (Karlsberg) are active in the production and distribution of beer and beer-based mixed drinks. Karlsberg also distributes mineral water and other non-alcoholic beverages to a relevant extent at locations in North Rhine-Westphalia, south-west Germany and Bavaria. As medium-sized companies, they are both among the larger breweries in Germany, though not the largest ones. With the joint purchasing association Warsteiner and Karlsberg want to bundle activities in purchasing.

Assessment by the German Federal Cartel Office

The German Federal Cartel Office examined the project with regard to both the relevant sales and procurement markets. Since there are other major competitors besides Warsteiner and Karlsberg in the markets for beer and non-alcoholic cold drinks, the cumulated market shares are not in a problematic range and no other antitrust problems are apparent, the German Federal Cartel Office considered the purchasing cooperation to be admissible under competition law. However, in the event of an expansion of the purchasing company to include further shareholders, the authority reserved the right to re-examine the project as to its admissibility under the prohibition of cartels as well as the relevant merger control regulations, if applicable.

Assessment and Further Information

The decision of the Federal Cartel Office is also relevant for Switzerland. It recalls that joint purchasing activities can also be unobjectionable under the strict German competition law.

In our view, this decision is to be welcomed, as – within certain limits – purchasing companies and comparable forms of cooperation regularly have the purpose and effect of promoting competition, in particular lower purchase and, subsequently, sales prices. Under the Swiss Cartel Act, these should therefore not even qualify as agreements on competition. It is generally undisputed that if the market position of the parties to a purchasing cooperation is limited, restrictive effects on competition are unlikely. This principle is reflected in particular in the relevant regulations of the European Union (EU), especially the Horizontal Guidelines of the European Commission. This was also confirmed in the expert report by Richard Whish and David Bailey on the Horizontal Guidelines, which provides a good overview of the issue and case law. It confirms that cooperation on joint purchasing regularly does not have the object or effect of restricting competition. Excessively strict standards for such purchasing pools could inhibit competition and innovation, as companies would refrain from desirable activities for fear of sanctions. Such overregulation would also run counter to the goals of competition law.

So far, there is hardly any relevant practice on joint purchasing in Switzerland. The advisory practice of the Secretariat of the Swiss Competition Commission does not paint a clear picture of the criteria for the admissibility of joint purchasing that is consistent with EU regulations.

The parliamentary motions of Mr Français and Mr Wicki show a growing unease in Swiss politics that unproblematic or even welcome behaviour can be inadmissible and even lead to direct fines due to an overly extensive and formalistic practice by the Swiss authorities and courts. In the service of legal certainty and to promote competition and innovation in Switzerland, it would be welcome if the Swiss competition authorities would soon issue a guiding decision regarding joint purchasing and comparable cooperations that is materially in line with the corresponding rules in the EU.

The press release of the Federal Cartel Office can be found here (in German).