Digital competition: European Commission fines consumer electronics manufacturers
Yesterday the European Commission fined four manufacturers of consumer electronics (Asus, Denon & Marantz, Philips and Pioneer) for a total amount of over EUR 111 million for engaging in resale price maintenance (by encouraging retailers selling their products to charge their customers a fixed or minimum resale price). Under EU and Dutch competition law, restricting the ability of retailers to determine their own sale price amounts to a hardcore restriction of competition.
The role of algorithms
Interestingly, the algorithms used by the different market players seem to have played an important double role in the assessment of the case.
First, the European Commission points out that “sophisticated price monitoring tools” employed by the manufacturers “allowed the manufacturers to effectively track resale price setting in the distribution network and to intervene swiftly in case of price decreases”. The manufacturers’ algorithm therefore seem to have played a crucial role in the effectiveness of the RPM practice.
Second, the European Commission indicates that the interventions of the manufacturers aimed at the retailers with the most competitive prices, also had an effect on other retailers’ prices because of the widespread use of algorithms that automatically adjust retail prices to those of competing retailers. According to the Commission, “pricing restrictions imposed on low pricing online retailers typically had a broader impact on overall online prices for the respective consumer electronics products”.
All four companies cooperated with the Commission by providing evidence with significant added value and by expressly acknowledging the facts and the infringements of EU antitrust rules. The Commission therefore granted reductions to their fines ranging from 40 % (for Asus, Denon & Marantz and Philips) to 50 % (for Pioneer).
The European Commission’s previous guidance
The case fits within the framework of the Commission’s Digital Single Market strategy and its E-commerce sector inquiry of May 2017, which stated: “The wide-scale use of such [pricing] software may in some situations, depending on the market conditions, raise competition concerns”. In June 2017 the European Commission also warned that algorithm-enabled price monitoring may increase the “gravity” percentage as such price monitoring can constitute a rigorous implementation of an RPM. Vestager held in March 2017: “If those tools allow companies to enforce their cartels more strictly, we may need to reflect that in the fines that we impose.”