The European Commission (“Commission”) recently fined Denon & Marantz, Asus, Pioneer and Philips (the “Individual Parties”) a total of EUR 111 million for restricting the ability of online retailers to set retail prices for their products – a hard-core restriction under EU competition law known as “resale price maintenance” or “RPM” (the “Infringement Decisions”). These Infringement Decisions are noteworthy because: (i) they are the first e-commerce infringement decisions since the Commission’s 2017 Final Report on its e-commerce sector inquiry; and (ii) the last ‘traditional’ RPM fine imposed by the Commission was fifteen years ago in Po/Yamaha COMP/37.975 (16 July 2003).
The Commission’s e-commerce sector inquiry, which aimed to “obtain an overview of the prevailing market trends and gather evidence on competition barriers linked to the growth of e-commerce”, revealed that pricing restrictions were by far the most widespread restriction reported by retailers. These Infringement Decisions show the Commission following up on the results of that inquiry and acting decisively in relation to these vertical restraints in the context of e-commerce.
There were significant similarities between the infringing conduct in each of the 4 individual cases. In each case, the prices being charged by on-line retailers was being monitored by means of one or more of:
- the manufacturer itself, including senior management;
- competitors of the on-line retailers who complained they were unable to make the margins they had predicted on their sales; and
- price comparison websites and internal software – some with serial number tracking mechanisms.
When prices fell below the manufacturer’s preferred level, the manufacturer threatened to stop supplying the on-line retailer and/or to block the on-line retailer’s account unless the on-line retailer priced at the desired higher level. In certain cases supply was cut off.
The markets affected were principally France, Germany, Belgium and the Netherlands, but in the Pioneer case, up to 12 EEA markets were affected – and Pioneer also sought to prevent parallel trade within the EEA – in order to protect potential price differences between different Member States.
In each case, the Commission took a similar approach:
- it based its fine on a relatively modest proportion of sales (7-8%), significantly below the 30% ceiling set in the Commission’s Guidelines on the Method of Setting Fines. In doing so, it noted that vertical agreements and concerted practices such as RPM, despite being hard-core vertical restraints, are often less damaging to competition than horizontal agreements; and
- it awarded significant discounts for cooperation (40-50%).
It is interesting to note that Pioneer’s attempts to divide markets on national lines and prevent parallel trade did not merit any additional punishment.
Over the past year, the CJEU (see our post on Coty), Bundeskartelamt (see our post on Asics) and CMA (look out for our upcoming post on Ping) have adopted judgments and decisions concerning the legitimacy of retailers imposing restrictions on on-line sales in particular branded contexts. These recent Infringement Decisions provide further useful, generally applicable guidance to all parties – suppliers and on-line sellers alike – trying to navigate the on-line sales space in the midst of continued ongoing interest from the competition authorities – whilst re-emphasising that RPM is a hard-core restriction the Commission can and will act to prevent.
The team at Covington will continue to monitor and update on further developments in the e-commerce context.