The European Commission fined household appliance companies for over 111 million euros. The procedure was launched based on allegations that manufacturers applied fixed prices towards their online retail dealers.
The European Commission investigated the behaviour of Asus, Philips, Pioneer and Denon & Marantz towards their retail dealers in a procedure launched in February, 2017. It was established that for years, the above companies prescribed minimum retail prices for their webshop operating partners. Moreover, complying to the above was regularly controlled, and decrease of the prices or differing from the expected price was punished by multiple sanctions (e.g. by rejection of orders). The advantage achieved through this practice was neutralized by the imposed fine which, due to the co-operation of the companies with the Commission during the procedure, was reduced by nearly 50%.
What is exactly the problem with price fixing? Why is it prohibited by both European and Hungarian competition law? Competition law prohibits both horizontal (among competitors) and vertical (producer – distributor, distributor – retailer) price fixing. Such practice either among competitors or among upstream/downstream companies may decrease the level of competition. So, if producers or distributors stipulate minimum prices for their retailers, the competition might decrease in the downstream market, or retailers might have to adjust prices to the stipulated minimum price instead of the price demanded by the consumers. At the end of the day it is against the consumers’ interest.
How to make the best of the two worlds? How could companies sell their product at a desired price without effecting the consumers negatively? Although according to the European Competition Law, applying minimum price, fix price, fix margin, fix maximum discount or negative incentives are prohibited, it is not against the law to define recommended price or maximum selling price. As a producer or distributor you might want to pay attention to the following: a recommended price should always be a recommendation – so ignoring the recommendation should not be penalised. In case of applying maximum prices, there must be an appropriate margin between purchase price and maximum selling prices – otherwise it will be considered as a fix price.
Being a distributor is not easy if you want to stipulate prices in your sales channels. In the future, it is advisable to pay more attention to this issue because the evolution of online markets raises the attention of competition authorities. The Hungarian Competition Authority placed on its agenda already in 2016 to analyse consumer and dealer practices on online markets.