In a first, the EU Commission fines four consumer electronics manufacturers EUR 111m for Resale Price Maintenance
- July 25, 18
Yesterday the European Commission imposed fines for EUR 111 million in aggregate to four consumer electronics manufacturers for fixing distributors’ resale prices of their products on the internet, a commercial practice commonly referred to as Resale Price Maintenance (or RPM). RPM is a conduct by which suppliers restrict, contractually or through other behavior, the ability of retailers to freely set the resale price of the supplied products.
Nature of Alleged Infringement
The Commission identified as two distinctive features of the infringement (a) the widespread use of algorithms to monitor and adjust prices, in combination with (a) threatening to stop supplies to distributors which apply retail prices below the recommended level, including in relation with cross-border sales within the EU.
Another novel element of the decision is that the parties have cooperated with the Commission since the early stage of the investigation and reportedly reached a formal settlement before the issuance of the Statement of Objection, thus obtaining an overall discount on the fine from 40% to 50%.
Interestingly, this is the first time the Commission fines undertakings for RPM, despite EU antitrust law from the outset characterized such practices as “hardcore” restrictions in breach of Article 101 TFEU (prohibition of anticompetitive agreements). This decision is indeed direct consequence of the enforcement policy spurred by the results of the Commission’s e‑commerce sector inquiry published in May 2017, which highlighted RPM as one of the most widespread restrictive conducts in online sales (see here for our analysis of the findings of the inquiry, originally published on Law360).
Recommending resale prices is deemed a lawful conduct, but this decision confirms that recommendations combined with strict monitoring and retaliatory measures are prohibited within the EU and may entail steep fines.
US vs EU Principles on Resale Price Maintenance
By contrast, US antitrust law, particularly after the landmark Leegin judgement (2007), has been much more permissive towards RPM, particularly because it falls under a “rule of reasons” rather than being deemed anti-competitive by its very nature (or per se, with very few exceptions) as in the EU/EEA.
This difference in approach is because EU competition law aims, among other things, at promoting a Single Market where goods and services may circulate freely across Member States, without restrictions created by conducts of undertakings that fragment competition and prices along national lines. The protection of intra-brand competition across borders, enhanced by the rise of the e-commerce, is therefore a means which the Commission deems essential to pursue this goal.
Officials of the Commission task force for e-commerce announced that future enforcement actions may also address restrictions imposed on retailers to advertise on the internet, particularly through bans to use certain brand names or other key words as general search terms (so called non-brand bidding practices). Indeed, concerns about the lawfulness of such practices have been raised by the Commission in the findings of the e-commerce sector inquiry; and the UK Competition and Market Authority has also published a market study on the impact of such practices on competition through price comparison websites.
The Commission press release is available here: http://europa.eu/rapid/press-release_IP-18-4601_en.htm