The Federal Court of Justice ruled on Tuesday that large retailing chains in Germany will no longer be allowed to lower prices of goods below their purchase costs -- even in an environment of fierce price wars.
The ruling lends teeth to a Sept. 2000 decision of the Federal Cartel Office to forbid giant American retailer Wal-Mart and German discounters Aldi and Lidl from slashing prices on basic groceries. In an effort to gain market share and facing stiff competition from the well-established Aldi and Lidl chain, Wal-Mart lowered prices in May 2000 on basic food items such as milk below those charged by Aldi and Lidl. The companies responded by dumping their prices as well, with milk dropping to as little as 43 cents per liter and sugar as low as 75 cents a kilogram.
Commerce associations and trade unions in Germany have warned that such price wars will lead to substantial job losses. The court has ruled that the constant selling of products under their purchase costs hampers smaller competitors and must be banned. However, the hindrance of smaller and medium-sized competitors does not need to become apparent in order to enforce a ban, the court said.