No more turning a blind eye
Samsung’s fine is the first tangible result of the vertical restraints crusade launched by the ACM in late 2018, after a decade-long more liberal approach to vertical restrictions (see our March 2019 newsletter). So far, the fine is also the only outcome of a December 2018-initiated investigation into vertical price-fixing of consumer goods by manufacturers and online and offline shops.
The ACM’s only other (publicly known) vertical restraints investigation was recently closed for lack of evidence. However, upon closing the investigation, the ACM gave an explicit warning to suppliers not to pressure retailers into following their retail price recommendations or to inform retailers of the resale prices of other retailers. It may therefore just be a matter of time before the ACM picks another vertical restraints fight.
RPM ‘light’ – Systematic price coordination?
According to the ACM’s summary decision (the full decision has not yet been published), Samsung used automated price monitoring systems, such as spider software, to keep an eye on retail prices. As soon as the monitored retail prices deviated too much from Samsung’s recommended resale price, Samsung would discuss internally which retailers should be contacted. It would subsequently urge those retailers to adjust their prices, whilst assuring them the same price was being communicated to competitor retailers. Samsung would also follow up on complaints of diverging prices from competitor retailers. In addition, Samsung would request retailers to delay adjusting their prices to a diverging (lower) level until after Samsung had contacted the deviating retailer.
The ACM found that Samsung’s monitoring practices, its internal coordination and external communications, including its frequent contact with individual retailers on retail prices and future competitor retail prices, added up to systematic price coordination, to the detriment of consumers. The ACM imposed a fine of almost EUR 40 million on Samsung for this price coordination. When setting the fine, the ACM took into account that this is its first-ever fine for this type of violation. In addition, it classified the absence of “any sanctions (or the threat thereof) or incentives (financial or otherwise)” as a mitigating factor.
It is noteworthy that the summary decision refers to ‘price coordination’, instead of RPM, to describe Samsung’s conduct. The absence of threats or incentives in Samsung’s price persuasions may have restrained the ACM from explicitly qualifying it as RPM. However, threats or incentives for price deviations do not seem an express requirement to establish RPM. The draft revised Guidelines on vertical restraints, for instance, note that RPM is “clear-cut where a supplier requests a price increase and the buyer complies with such a request”. The full decision’s publication should shed more light on the reasons for the ACM’s wording. Moreover, Samsung’s announced appeal is likely to set (even) clearer boundaries between RPM and recommended resale prices.
The ACM’s first-ever fine for vertical price coordination may not be its last, given its ongoing focus on vertical restrictions. It also fits into the ACM’s “more fines” announcement in 2019 (see our March 2019 newsletter). Companies are well-advised to double-check the frequency and conversation topics of their communications with distributors, and to ensure their price monitoring software is not used as a tool to act against diverging resale prices. It may also be worthwhile to complete the ACM’s “price advice test”.
The recently imposed fines of almost EUR 40 million on two collectors and of EUR 190,000 on three individuals for a buying cartel in the used cooking oil sector are further proof of the ACM’s intentions to impose more fines. Buying cartels have caught the attention of more competition authorities, with another ACM buying cartel investigation still pending (see our December 2019 newsletter). More fines may thus be imminent.
This article was published in the Competition Newsletter of October 2021. Other articles in this newsletter:
• Commission's record fine for gun jumping upheld
• Commission reveals first piece of antitrust sustainability puzzle
• Court of Appeal provides guidance for further course of proceedings in pre-stressing steel litigation