Statement by Commissioner Vestager on Commission decision to impose fines on four consumer electronics manufacturers for fixing online resale prices - EU monitor

EU monitor
Monday, June 1, 2020

Statement by Commissioner Vestager on Commission decision to impose fines on four consumer electronics manufacturers for fixing online resale prices

Source: European Commission (EC) i, published on Tuesday, July 24 2018.

Today, the Commission has taken four separate decisions to fine Asus, "Denon & Marantz", Pioneer and Philips a total of 111 million euros for breaching EU antitrust rules. These well-known manufacturers of consumer electronic products each put pressure on online retailers to maintain higher prices. They did so during periods ranging from 2011 to 2015.

If a manufacturer noticed that a particular online retailer was offering lower prices than they wanted, they would contact the retailer to tell them to increase their prices. And if that retailer did not cooperate, it would face sanctions. These sanctions included, for example, withdrawing the supplies of the products in question.

The online commerce market grows rapidly and is now worth over 500 billion euros in Europe every year. More than half of Europeans shop online. As a result of the actions taken by the four companies, millions of European consumers faced higher prices for kitchen appliances, hair dryers, notebook computers, headphones and many other products they wanted to buy from online retailers.

This is illegal under EU antitrust rules. Our decisions today show that EU competition rules serve to protect consumers where companies stand in the way of more price competition and better choice.

One of the big advantages for consumers of e-commerce is that you can easily compare prices and shop around for the best deals. By stopping retailers from offering lower prices, the four manufacturers denied consumers the full benefits of e-commerce.

Each of the four manufacturers individually targeted online retailers that offered the lowest prices for their products. Sometimes the manufacturers intervened because of price deviations of just one euro; other interventions concerned price increases of more than 100 euros. In any event, the manufacturers wanted retailers to charge artificially higher retail prices for their products - we call this "resale price maintenance". It meant consumers were worse off.

Under EU competition rules, minimum or fixed resale price maintenance is considered a restriction of competition and will usually be illegal. At the same time, our rules enable companies to justify their behaviour if it creates efficiencies - for example by making the launch of a new product a success for the benefit of consumers. Our rules also offer manufacturers possibilities to provide support and protect brick and mortar shops. Neither was the case here - all four companies admitted that there was no justification for their actions and that they had broken competition rules.

In fact, by targeting specific low price retailers, the four manufacturers were also able to influence the prices other online retailers charged. This is because online retailers use pricing algorithms and price comparison websites to constantly monitor, in real time, the prices charged by their competitors. They then adjust their prices accordingly. So if one retailer offers lower prices than others, this prompts other competitors to lower their prices. Conversely, if that retailer puts its prices back up, other will follow.

These practices were in place over a period of four years and stopped in 2015. That was after the Commission carried out unannounced inspections at the premises of certain manufacturers and started to look into these practices.

And finally a word about the geographic scope of these practices - the Member States affected by the restrictions were different for each case. Asus applied the practices in France and Germany. Denon & Marantz intervened in Germany and the Netherlands. Philips used these practices just in France. And Pioneer took action against retailers in twelve countries - Belgium, Denmark, Finland, France, Germany, Italy, the Netherlands, Norway, Portugal, Spain, Sweden and the UK.

As I mentioned, in all four cases the companies admitted that they had broken competition rules. They also gave the Commission additional evidence. This helped us to take a decision and tackle the problem for consumers more quickly.

As a result, we decided to reduce the fines by 50% for Pioneer and by 40% for the other three companies. Pioneer received a slightly bigger reduction because they came forward with better quality evidence than the others.

This shows that, as part of our antitrust investigations, we are prepared to recognise effective cooperation by companies. The level of fine reduction depends on the extent and timing of the cooperation in the specific case, and the resulting benefits in terms of efficient procedure and effective enforcement. In the cases decided today, the companies acknowledged the infringement even before the issuing of a statement of objections. They also provided evidence that added significant value to what was already in the Commission's file. This allowed for a number of administrative efficiencies. So, this kind of cooperation benefits both sides. And ultimately, effective and swift enforcement of our rules benefits consumers.

Our decisions demonstrate that the Commission will sanction anti-competitive behaviour in e-commerce markets that aims to prevent price competition between retailers, against the interests of consumers. Such practices are a serious violation of European competition rules.

E-commerce creates enormous possibilities for consumers as well as for businesses. In principle, consumers can, from the sofa at home, find what they need and compare prices of sellers all over Europe. So their choice isn't limited to what's on offer locally. Similarly, businesses can trade throughout our Single Market of more than 500 million people using a single website as their shop window.

But e-commerce also brings its own challenges for competition. That is why the Commission did a sector inquiry into the e-commerce sector to identify business practices that may restrict competition.

This sector inquiry confirmed that the use of pricing algorithms to monitor and influence the price setting behaviour of retailers, as I described earlier, is quite widespread.

We also found in the sector inquiry that more than one in ten surveyed retailers experienced cross-border sales restrictions in their distribution agreements. Such restrictions limit their ability to sell online to consumers in other Member States. Specifically, we are looking into concerns that Guess, Nike, Sanrio and Universal Studios are restricting cross-border and online sales of products in distribution agreements. These investigations are ongoing and I will not prejudge their outcome.

To conclude, through our competition enforcement tools, we will remain vigilant to ensure that consumers are not harmed when shopping - offline or online.

Thank you.



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