On 24th July 2018 the EU Commission passed a decision to enforce the competition rules in yet another case involving the e-commerce sector. This time it fined a number of leading consumer electronics groups including Denon & Marantz and Pioneer, over 111 million euros for a range of resale pricing and other competition law infringements. The level of fines were substantially reduced due to the companies ‘ cooperation with the Commission .
The Commission’s e-commerce sector inquiry, the results of which the Commission published in May 2017 as part of its Digital Single Market strategy, showed that resale-price related restrictions are by far the most widespread restrictions of competition in e-commerce markets . This makes effective competition enforcement in this area important. The study also shed light on the increased use of automatic software applied by retailers for price monitoring and price setting.
Given the results of the e-commerce sector inquiry the particularly interesting aspect of these cases is the role played by pricing algorithms deployed by the companies concerned to ensure their distributors set their resale prices at the manufacturers’ recommended levels.
The companies engaged in resale price maintenance by restricting the ability of their online retailers to set their own retail prices for widely used consumer electronics products such as kitchen appliances, notebooks and hi-fi products. In particular the manufacturers intervened with online retailers, who offered their products at low prices. If those retailers did not follow the prices requested by manufacturers, they faced threats or sanctions such as blocking of supplies. The companies used pricing algorithms to effectively track resale price setting in the distribution network and to intervene swiftly in case of price decreases. The price interventions limited effective price competition between retailers and led to higher prices with an immediate effect on consumers. In addition in one of the cases parallel to resale price maintenance a manufacturer also limited the ability of its retailers to sell-cross border to consumers in other Member States in order to sustain different resale prices in different Member States, for example by blocking orders of retailers who sold cross-border.
In imposing the fines Commissioner Margrethe Vestager, the EU Competition Commissioner commented: “The online commerce market is growing rapidly and is now worth over 500 billion euros in Europe every year. More than half of Europeans now shop online. Our decisions today show that the EU competition rules serve to protect consumers where companies stand in the way of more price competition and better choice.”