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The European Commission (EC) has sanctioned Asus, Denon & Marantz, Philips and Pioneer with fines of a total of €111 million for imposing minimum and fixed resale prices on online retailers for their electronic products.
In the context of a vertical agreement, imposing minimum and fixed resale prices constitutes a particularly serious restriction of competition and is contrary to competition law. Some exceptions to this general rule are the setting of resale prices in the framework of an agency relationship and the launching of new products for the benefit of consumers. Indeed, the supplier’s capacity to impose maximum sales prices or recommend a sale price to its retailers is recognized as lawful, provided these are not equivalent to a fixed or minimum sale price as a result of pressures or incentives from any of the parties to the contractual relationship.
According to the EC’s press release and as recognized by the four companies involved, Asus, Denon & Marantz, Philips and Pioneer have engaged in resale pricing behavior that mainly targeted online retailers selling their products at low prices. Retailers that did not apply the prices imposed by the manufacturers received warnings or were sanctioned by having supplies withdrawn. According to the EC, the manufacturers used very sophisticated mechanisms to monitor the resale prices imposed on retailers. Sometimes the manufacturers even intervened when the retailers deviated from the fixed price by just one euro.
“Our decisions demonstrate that the Commission will sanction anti-competitive behavior in e-commerce markets that aims to prevent price competition between retailers, against the interests of consumers.”
Margrethe Vestager, Competition Commissioner (July 24, 2018)
The EC considers that the impact of these practices was not limited only to the affected retailers, but that it extended to the main distribution chains as a result of the algorithms these chains use to determine their prices. These algorithms take into account, among other variables, the prices their main competitors charge for the products.
Below we summarize the practices of each of the manufacturers fined, according to the information disclosed by the EC:
– Asus monitored the resale prices the retailers of this brand’s computer equipment applied in Germany and France between 2011 and 2014. It addressed retailers that sold below recommended prices and compelled them to increase their prices. Therefore, Asus was fined €63.5 million.
– Denon & Marantz participated in a resale price-setting behavior of audio and video products under the Denon, Marantz and Boston Acoustics brands in Germany and the Netherlands between 2011 and 2015. Denon & Marantz has been fined €7.7 million.
– Philips required some of its retailers in France to respect the resale prices set by Philips for various electronics products, including kitchen appliances, coffee machines, vacuum cleaners, home cinema and video systems, electric toothbrushes, hair dryers and shavers, between 2011 and 2013. Philips has been fined €29.8 million.
– Pioneer limited the freedom of its retailers to set resale prices and the ability to make crossborder sales of home cinema products, loudspeakers and other hifi audiovisual products within the European Union. This conduct affected distributors in 12 Member States, including Spain, between 2011 and 2013. The fine imposed on Pioneer for its behavior is €10.2 million.
The fines finally imposed by the EC recognize and reward the cooperation of the companies during the investigation with reductions of 40% (Asus, Denon & Marantz and Philips) and 50% (Pioneer) of the fine, because the companies acknowledged the facts and provided evidence of significant added value for the investigation.
These decisions are part of the EC’s strategy for creating a digital single market where European consumers can easily compare the prices of the products they want to buy. In the words of Competition Commissioner Margrethe Vestager, “by stopping retailers from offering lower prices, the four manufacturers denied consumers the full benefits of e-commerce.”
According to the EC’s report on e-commerce published in May 2017, resale price fixing is the most frequent restriction to online retail trade. The report also identified an increasing trend in the use of pricing algorithms to monitor and influence retailers’ price setting behavior.
The EC has other ongoing investigations into alleged anticompetitive practices in online distribution in the sectors of video games, tourist accommodation, clothing and accessories, and merchandising products (for more information on these investigations, see the post of June 19, 2017) .
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