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Exchange of price information between Bestseller and its franchise partners

24. marts 2010

The Danish Competition Council has decided to meet an application from Bestseller A/S and has adopted a commitment decision, cf. section 16 a of the Danish Competition Act, allowing Bestseller A/S to regain access to price information from its franchise partners – irrespective of a previous injunction issued by the Competition Council in 2003.

Bestseller A/S is a wholesale company that imports and distributes men's, women's and children's wear to Bestseller brand stores, which are either owned by independent franchise partners or by subsidiary companies of the Bestseller Group, and to other stores, which are not part of the Bestseller brand chains.

In August 2003 the Competition Council had ordered Bestseller to remove a clause on resale price maintenance, and at the same time the Competition Council also ordered Bestseller to change the company's IT system so that the franchise partners' sales prices and profits were no longer accessible to Bestseller.

Although vertical exchange of price information between a supplier and his dealers will normally not give rise to competition concerns, the Competition Council found that in this case it should be seen as an integral part of the resale price maintenance clause, and that the order to remove this clause might be ineffective if the dealers could still report their sales prices and profits to Bestseller, as it could be taken as a signal of continued price monitoring by Bestseller. This decision was subsequently confirmed by the Competition Appeals Tribunal as well as the High Court.

During the almost seven years that have passed since the Competition Council's decision in 2003, Bestseller has made a fundamental change of the company's partner agreements and its IT system, and has also taken some initiatives with the aim of teaching the franchise partners how to calculate their own prices.

The investigations made by the Competition Authority in connection with the reassessment of the matter revealed no signs of any explicit or tacit agreements between Bestseller and the independent partners on resale price maintenance. Consequently, the Competition Council found it sufficiently proved that future access to price information will only be used for purposes aimed at promoting efficiency, and that there is no longer any legitimate reason why Bestseller should be placed in a worse position than its competitors.
Nevertheless, the fact that the Bestseller Group owns a number of brand stores and as such plays a dual role as a supplier and competitor to its independent franchise partners, meant that the case included a horizontal aspect, which gave rise to concern that confidential information from individual franchise partners might be passed on to other franchise partners or to the retail companies of the Bestseller Group.

Bestseller has offered a number of commitments, however, that eliminates the concerns of the Competition Council. Among other things, Bestseller has undertaken to put up a data block that excludes individual dealers from access to other dealers' data, and to put up "Chinese walls" inside the company that guarantee total separation between the persons appointed to treat the data from the individual franchise partners, and other persons within the Bestseller Group dealing with price fixing in Bestseller-owned stores.

As a consequence of these commitments the Competition Council declared that its injunction from august 2003 shall not prevent the wholesale company Bestseller A/S from gaining access to price data etc. from its independent franchise partners.