Although resale price maintenance is a hardcore restrictions under competition law, enforcement was not a priority for the Netherlands Authority for Consumers and Markets (ACM) for a long time. Until not long a few years ago. In 2021, ACM imposed a fine on Samsung of over 39 million euros for exercising undue influence on the online retail prices of television sets. Competition authorities in other European countries and the European Commission have also imposed multiple fines in the meantime. This blog sets out the basic principles about the prohibition of resale price maintenance.
What is resale price maintenance?
Resale price maintenance (RPM) occurs when a supplier directly or indirectly exercises undue influence on the resale prices of a buyer, such as a retailer or distributor. Buyers should be free to determine their own resale prices, although there are exemptions of which the most important ones are those for (true) recommended prices or maximum prices.
Under competition law, resale price maintenance is regarded as a so-called ‘hardcore restriction’: a serious restriction of competition. Resale price maintenance is therefore prohibited.
The prohibition also includes indirect forms of resale price maintenance. For example, a supplier may not give bonuses or discounts on the condition of maintaining a certain price level, nor may it impose sanctions (such as delivery refusals or delays) if the buyer neglects list prices.
Violations of the RPM-prohibition on resale price maintenance are subject to heavy fines. For example, the European Commission has already imposed fines totaling €111 million on four consumer electronics manufacturers. These manufacturers (Asus, Denon and Marantz, Philips and Pioneer) had imposed fixed or minimum sales prices on their online retailers for years.
If these retailers did not comply, deliveries were halted. As a result, the online retailers started aligning their prices. The European Commission assumed that this would lead to higher prices for consumers and therefore intervened strongly.
In other countries, including Germany, Great Britain, France and Austria, the resale price maintenance ban has been strictly enforced for many years. ACM has also become stricter in its enforcement. In 2021, it imposed a fine on Samsung of over 39 million euros for exercising undue influence on the online retail prices of television sets.
ACM has communicated guidelines for cooperation between suppliers and customers.
One of the reasons for ACM’s stricter enforcement is the increase in online sales and the fact that it has become much easier (with the help of algorithms) for them to monitor the retail prices of their buyers.
What is allowed?
Exceptions to the prohibition on resale price maintenance do exist.
In individual but very exceptional cases, minimum prices or fixed prices may be permitted. For example – and only to the extent – this is necessary to introduce a new product which may actually increase competition. RPM may also prevent free riding by other resellers in situations where consumers would first visit a store to seek advice for an expensive or complex product and then purchase it online from a competitor who is able to offer lower prices because it has no (or much less) shops and personnel. Minimum prices can prevent webshops from taking advantage of the extra service provided by competitors with (brick and mortar) stores and trained personnel.
In these examples, the supplier must be able to demonstrate that it is necessary to use the minimum or fixed prices. Moreover, no alternatives (such as selective distribution) should be available to achieve the same effect. This burden of proof is generally high.
Recommended retail prices or maximum prices
In vertical relationships, it is permitted to communicate to the customer a recommended or maximum price. This is regulated in the European block exemption for vertical agreements. One must be careful though: a recommended retail price may not have the same effect in practice as a fixed or minimum price would have. In addition, the market share of the supplier as well as the buyer may not exceed 30%.
Do you have questions about this topic? Would you like to assess your agreement or seek advice? Or is ACM enquiring with or even investigating your company? Please feel free to contact us without obligation, we will be happy to help you.