What is going on?
Electronics manufacturer Samsung gets a fine of 39 million euros of the Netherlands Authority for Consumers and Markets (ACM). Between 2013 and 2018, Samsung used software to monitor the prices of its televisions at at least seven web stores. Web shops with a lower price than the market price desired by Samsung were ‘advised’ a different, higher sales amount. In addition, according to mail and app traffic that the ACM has seen, Samsung said that other retailers had also been advised that price.
Samsung carefully used the words ‘advice’ or ‘recommended price’, but there was no question of obligation, finds the ACM. The ‘advice’ distorted competition and also led to higher prices for consumers.
A store buys TVs from Samsung and then sells them to consumers. Why would that last price matter Samsung?
To prevent web stores from getting into a price war and outdoing each other with ever lower prices. The profit margins of retail companies would then come under so much pressure that they would want to negotiate a lower purchase price from Samsung, the ACM believes.
This danger does not only exist in online shopping. Competition law lawyer Robin Struijlaart of Loyens & Loeff emphasizes that he does not know the details of this case, but says that especially with electronics, online stores have a major advantage over physical stores because they do not have to pay staff and stores. ‘While a consumer wants to see what kind of image a television gives, and then order it online much cheaper. In order not to hollow out the physical retailer, a manufacturer may go on or over the edge.’
What can and cannot be imposed by a manufacturer on a retailer?
A supplier may give a suggested retail price to the buyer. Samsung believes that nothing more than that has happened in this case. It says it has complied with all competition rules, which is why the manufacturer announced that it would contest the fine.
In general, a suggested retail price may never be regarded as a sales amount imposed by the manufacturer. However, the manufacturer may enforce a maximum sales price to prevent a retailer from asking much more for the product than it is worth. European rules should protect consumers against more influence from the manufacturer on the final sales price. For example, a maximum price may not function as a fixed price. Monitoring (online) sales prices is allowed.
In 2018, for example, clothing brand Guess was fined more than 39 million euros by the European Commission for making prohibited agreements with retailers. They were only allowed to sell the brand if they promised not to sell it in certain countries, determined a price without consulting Guess or sold Guess trousers online. For example, between 2014 and 2017 Guess actually controlled the price rather than the retailer, which resulted in prices in Eastern Europe being 5 to 10 percent higher than in Western Europe.
The European Court of Justice considered it proven that a number of makers of picture tubes made price agreements, as a result of which consumers paid too much for televisions and monitors between 1996 and 2006. The Consumers’ Association filed a claim on their behalf, and is still considering whether it will also file a claim in this case on behalf of people who have paid too much for their Samsung television.
What about that other big electronics manufacturer, Apple?
The French consumer authority ruled in April last year about a 2012 complaint from a seller of Apple products. Apple would, in effect, keep prices at that Apple-certified seller at the same level as in its own stores through devious detours. For example, by supplying less of a product that was discounted without Apple’s approval. Also, Apple would control the supply of products in great detail and deliver at such narrow margins that resellers would avoid stunting the price. The French regulator fined Apple 1.1 billion euros, which Apple says it wants to fight.
The fact that the sales prices of a laptop or jeans are the same everywhere does not necessarily mean that the manufacturer has influence on this, says lawyer Robin Struijlaart. ‘Sometimes a market is so transparent that there is no reason for manufacturers and retailers to do anything about the price without making prohibited agreements. Argued from their point of view, a price war is no fun for anyone.’
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