News Update Competition
Samsung's fine for influencing retail prices: recommended prices in the twilight zone?
27 oktober 2021
27 October 2021
In September 2021, the Netherlands Authority for Consumers and Markets ("ACM") imposed a EUR 39.9 million cartel fine on Samsung Electronics for influencing the selling price of Samsung televisions applied by seven major retailers.It is the first time that the ACM has imposed a fine for anti-competitive agreements between suppliers and customers (vertical agreements) since the G-Star/Secon case 20 years ago. It also marks a change in the Dutch laissez-faire approach to vertical agreements. Other EU competition authorities such as the European Commission and the German Federal Cartel Office (Bundeskartellamt) have been traditionally more active in enforcing vertical agreements. Now the ACM has followed suit.
Samsung's infringementSamsung was fined for actively influencing the online sales prices of Samsung televisions of seven major retailers between 2013 and 2018. Samsung used 'spider software' to monitor retail prices through price comparison websites and online retail stores. The retailers themselves also monitored prices and complained to Samsung about non-compliance by other retailers. If prices significantly deviated from the advised price, Samsung urged retailers to raise the selling price. Retailers usually reacted positively to Samsung's inquiries with replies like: "Done, visible in 15 minutes". In addition, Samsung communicated to the retailers that competitors would also increase their prices accordingly and that “all other partner parties have been advised”. As Samsung constantly communicated with the retailers, the retailers knew that they would not price themselves out of the market if they followed the advised price.
Recommended prices in the twilight zone?This decision raises the question whether a price recommendation can be a hardcore cartel infringement. Samsung states that it merely advised retailers and did not coerce retailers nor provided incentives to adjust their price to the recommended retail price. Samsung argues that it has always made it clear that retailers were completely free to set their own price and that it has never forced retailers to use its recommended prices.
The monitoring of online sales prices by suppliers is allowed. A supplier may also impose a maximum price or communicate a non-binding recommended price. This is explicitly exempted from the cartel prohibition under the Vertical Block Exemption Regulation. Furthermore, the Samsung case does not constitute an example of enforcing minimum or fixed prices – conduct that is typically regarded to be a hardcore infringement and not exempted under the Vertical Block Exemption Regulation.
However, according to the ACM, Samsung's conduct cannot be qualified as 'simple' price recommendations. Samsung went further than to simply provide indicative list prices or non-binding recommended retail prices. Samsung, still according to the ACM, effectively steered selling prices by informing retailers of their competitors' pricing intentions and by urging to adjust the selling price in reaction to retailers' complaints.
The ACM's chairman has indicated that the Samsung case should not be regarded as a change in the current practice regarding recommended prices. Suppliers may still communicate non-binding recommended prices to the retailers.
- Although the ACM has explicitly stated that recommending resale prices to their customers is allowed, following the decision, it may be more difficult for companies to assess their compliance. Recommended prices that seem to be allowed based on one e-mail or a supplier agreement, may be part of a wider practice of price influencing and hence be prohibited. Compliance risks, thus, need to be broadly assessed in the context of all interactions and notably the actual behaviour of relevant sales employees.
- The ACM imposed a significant fine on the supplier in the context of a vertical agreement. The ACM's chairman indicated that 'horizontal' elements of this infringement influenced the fine's amount. In Samsung's favour, the ACM took into account the fact that price coordination did not involve any threat of sanctions or incentives (financial or otherwise) and that it was the first time that the ACM imposed a fine for these types of infringements.
- The ACM has qualified price influencing as a 'by object' infringement, while it is not a typical vertical hardcore restriction such as retail price maintenance. Also, there are no similar precedents available. This raises the question if a 'by effect' analysis would have been more appropriate.
ACM on vertical price agreements: lessons for the futureSimultaneously with the Samsung decision, the ACM launched a campaign (in Dutch) to warn suppliers and retailers of prohibited vertical price agreements. In the self-assessment tool (in Dutch), the parties can evaluate their "recommended prices agreements" by answering a few questions.
The ACM clarifies in this regard that pressuring the retailers to raise selling prices can lead to the violation of the cartel prohibition. Examples of pressuring techniques include threatening to stop deliveries, imposing less favorable terms in contracts, and messaging or communicating constantly about the recommended retail price. The ACM states that - even in the absence of real pressure - communication of the sales prices of other retailers could constitute a violation.