E-Commerce In The EU: How And Why Manufacturers And Retailers Should Avoid Resale Price Restrictions

On 24 July 2018, the European Commission (the "Commission") announced that in four separate cases it had fined four manufacturers a total of more than €111 million for infringements of Article 101 of the Treaty of the Functioning of the European Union (TFEU) in relation to pricing restrictions imposed upon retailers.

This update considers the background to the cases, the Commission's concerns in relation to e-commerce in particular, and what this means for manufacturers and retailers.

Manufacturers' strategies to maintain pricing levels online

While the Commission's infringement decisions are yet to be published, the Commission's press release provides that, during a range of periods from 2011 to 2015, each of the four manufacturers independently placed pressure upon retailers to set higher prices online.

These practises affected a number of different Member States, and covered a range of different consumer electronics, including kitchen appliances, hair dryers, notebook computers, speakers, and headphones.

From its investigations, the Commission found that the manufacturers had deployed monitoring tools in order to track resale pricing within each of their distribution networks. With this data, each manufacturer was then able to individually target retailers that were offering lower prices online. In certain instances, manufacturers intervened in relation to price differentials of just €1.

In intervening, the manufacturer would contact the "lower price" retailer in question, and instruct them to increase their online prices to the manufacturer's desired levels. If the retailer refused, it faced threats or sanctions, with such sanctions including products being withheld from the retailer by the manufacturer.

The Commission found that these threats and sanctions had the aim of ensuring that the retailer changed its own commercial policy, and complied with the manufacturer's instructions in relation to resale pricing.

Resale price maintenance - a restriction of competition "by object"

A restriction of competition "by object" is a restriction that, by its very nature, can be regarded as "harmful to the proper functioning of normal competition".1

Where a "by object" restriction exists, there is no requirement for a competition authority (or third party) to prove that the restriction had any actual effect upon competition. This is on the basis that a "by object" restriction "reveals in itself a sufficient degree of harm to competition", such that is no need to prove any effect.2

Where a manufacturer requires its retailers to adhere to minimum or fixed resale prices determined by the manufacturer (so-called resale price maintenance, or "RPM"), this has consistently been held to constitute a restriction of competition "by object".3

As such, the use of RPM will generally infringe Article 101 TFEU, as well as the applicable national competition laws of EU Member States.

Specific concerns in relation...