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12 July 2007
In June 2004 the media reported that one of the largest grocery retailers in Austria had delisted Leberkäse (which is similar to meatloaf) produced by Neuburger. It was alleged that the delisting was the result of an abuse of market power by retailers following Neuburger's refusal to accede to the retailers' discount demands. As a result, the Federal Competition Authority initiated a general investigation of the grocery sector under Section 2(1)(3) of the Competition Act. However, in this case no infringement could be proven. Nevertheless, the authority sent out 170 information requests to market participants (eg, suppliers and grocery shops), which contained extensive questions as to turnover and the sales conditions and agreements between suppliers and retailers.
Approximately 40 companies did not provide the requested information or submitted incomplete forms. The authority has no power to impose penalties for failure to answer information requests; therefore, it applied to the Cartel Court, which ordered the companies to answer the information requests. Twenty-nine suppliers and three trading enterprises appealed against the order on the grounds that disclosure of the requested information would have exposed business secrets.
On appeal, the Supreme Court of Austria ruled that an obligation to inform the authority of business secrets exists only once the companies have been heard in court. In addition, the authority's interests in receiving the information must outweigh the companies' interests in protecting that information. The Supreme Court pointed out that the Cartel Court had neither given the companies the chance to comment on the authority's application nor investigated the possible interests of the implicated parties. Thus, the Supreme Court remitted the case to the Cartel Court for a new hearing and decision.
The companies were asked to comment on the authority's application. These comments were filed with the Cartel Court and hearings took place, during which a compromise was reached with most of the companies, which agreed to submit a limited amount of information to the authority.
The hearings, discussions and information requests led to the following conclusions on the grocery sector:
The authority published its findings in a summary report on its investigation into the grocery sector. In addition to the above results, the authority came to the unsurprising conclusion that the Austrian grocery market is highly concentrated. Despite the existing difficulties (eg, staff shortages at the authority, a lack of cooperation by companies), the authority intends to monitor the market closely in future and pursue any suspicion of abuses of market power.
The detection of market domination as set out by the Cartel Law is possible in some cases; but the detection of its abuse can fail where suppliers wish to preserve their relationships with retailers. However, as a result of the investigation, the grocery sector is now more aware of its behaviour.
Most suppliers have now reached settlements with the authority and the proceedings against these companies have ended. However, one supplier did not cooperate with the authority in time and the Cartel Court imposed a fine of €15,000 for each day that it failed to supply the requested information to the authority. The company appealed the fine to the Supreme Court; however, the higher court declared the fine to be justified and dismissed the company's appeal.
For further information on this topic please contact Dieter Hauck or Peter Resch at Preslmayr Attorneys at Law by telephone (+43 1 533 16 95) or by fax (+43 1 535 56 86) or by email (email@example.com or firstname.lastname@example.org).
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