Fines imposed on franchisor and franchisees for price collusions involving milking robots

Together with its three Danish franchisees, the Lely centres, Lely Nordic, which is a franchise for the sales of milking robots for the agricultural sector, has accepted to pay fines totalling DKK 1 million for having coordinated prices and shared markets in violation of the competition rules.

A fine of DKK 750,000 was imposed on Lely Nordic and a fine of DKK 100,000 was imposed on each of the franchisees. A fine of DKK 25,000 was also imposed on a Lely Nordic executive. The fines are a result of a decision by the Danish Competition Council from June 2014 that was upheld by the Danish Competition Appeals Board in September 2015.

For a period of more than four years, Lely Nordic and the franchisees had exchanged emails and held meetings where all parties were present and had discussed and agreed on prices and the partitioning of the markets. The coordination was found to be horizontal, meaning between competitors, and that its object was to restrict competition. Lely Nordic was not active on the same market as the franchisees, but was nevertheless found to have contributed to a horizontal agreement by having actively participated in the anti-competitive activities, including by arranging, participating in and following up at the meetings.

The matter shows that a supplier participating in a cartel between its independent distributors can share the liability for the cartel even if the supplier does not itself compete with its distributors. The above applies to both franchise systems and other types of distribution, including selective distribution. The matter also shows that the franchisees can be competitors in the same franchise system.

It is noted that the violation took place before the level of fines for violating competition law was significantly increased in 2013 and today a similar violation would most likely result in more severe sanctions.

The Danish Competition Authority's press release of 10 May 2016 about the matter can be read here (in Danish).

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