In the decision on objection of 19 July 2024, which greatly echoed the recent Samsung ruling, LG Electronics Benelux Sales B.V. (“LG”) objections have been deemed unfounded by the Authority for Consumers and Markets (“ACM”).
Much like the Samsung case, where the District Court of Rotterdam ruled in favor of the ACM, LG challenged the regulator’s fine for LG’s alleged price-fixing practices, which the ACM had originally imposed on
11 July 2023. However, the ACM, most likely reinforced by its victory in the Samsung case dismissed LG's objections. In this newsletter the most eye-catching points of the decision will be discussed.
Alleged Behavior
ACM fined LG for coordinating the retail prices with seven retailers in relation to the sale of LG television sets. The alleged coordination of the retail prices took place from January 2015 up to and including December 2018 (the “
relevant period”). LG, however, claimed that retailers remained able to determine their own online resale prices because the communicated prices were merely recommendations. The ACM maintains that even in the absence of coercion or financial incentives compelling the retailer to follow pricing instructions, there can still be a finding of a restriction by object. This is particularly the case if the context test reveals circumstances that suggest such a restriction by object is present.
The ACM deemed the following components particularly relevant in concluding the cartel prohibition was violated: (i) price monitoring: LG gathered data on online retail prices by repeatedly monitoring these prices used by retailers. This data was used to conduct analyses, for example to compare the online retail prices to LG’s recommended retail prices (“
RRPs”) and to investigate which retailer initiated online price reductions, (ii) internal coordination: LG communicated internally on the necessity of reaching out to retailers that used online retail prices that deviated from the RRP. LG employees encouraged each other to get in touch with those retailers, and made specific use of the price monitoring functionalities, (iii) communication between LG and retailers: The communication of LG with the seven retailers occurred through various means (e.g. WhatsApp, email, telephone). LG requested the retailers to adjust their online retail prices implicitly, for example by showing the respective retailer that it used a different price than other retailers while simultaneously stating its RRP. However, more explicit methods were also used. LG repeated requests when a retailer did not comply with the request, which was an indication that LG expected the retailers to comply. Also, LG gave these retailers information on price fluctuations of competitors, which gave them confidence that other retailers would use similar prices. LG took full initiative in the coordination with its retailers according to the ACM.
Based on the alleged conduct, the ACM concluded that LG’s practices could not be interpreted merely as non-binding price recommendations. According to the ACM, this conduct significantly undermined price transparency in a market where price comparisons should be readily accessible to online consumers. As a result the ACM found the behaviour to be an infringement of Article 6 of the Dutch Competition Act and Article 101 TFEU during the relevant period. This resulted in the imposition of a fine of € 7,943,500 for LG.
Positions of the parties
LG
LG’s defense largely mirrors the arguments previously raised by Samsung in its case before the District Court of Rotterdam. LG contends that it merely communicated recommended retail prices to its retailers and never forced them—neither contractually nor in practice —and also did not entice them with financial incentives to adhere to these recommended prices. According to LG, this should lead to the conclusion that no coordination occurred in the form of an agreement or concerted practice.
Furthermore, LG argues that its conduct cannot be classified as a restriction by object (as discussed in our earlier post regarding the Super Bock ruling), because there is insufficient evidence that its behavior led to a weakening of "inter-brand competition". Inter-brand competition refers to the rivalry between different brands or products that serve the same function or purpose. In this context, LG asserts that competition between LG televisions and, for instance, Samsung televisions was not diminished by the alleged collusive behavior. It is crucial to distinguish inter-brand competition from intra-brand competition, which concerns the competition between retailers (e.g., Coolblue vs. MediaMarkt). Additionally, LG notes that it does not hold market power, that its commercial interests should be considered when evaluating consumer price increases, and that the positive effects of coordination should also be taken into account.
ACM
The ACM, however, firmly asserts that there was indeed coordination and that LG's recommended prices went far beyond what is permissible within the bounds of competition law. The ACM highlights that coercion or financial incentives are not prerequisites for establishing resale price maintenance. In this case, LG’s persistent requests for retailers to follow its pricing recommendations, and the fact that these requests were adhered to, clearly constituted a concerted practice or an agreement, according to the ACM.
Additionally, the ACM argues that the practice amounted to a restriction by object. It points out that it conducted a sufficiently comprehensive and complete economic and legal contextual analysis. From an economic perspective, the ACM demonstrated that retailers were competing on consumer prices in an online environment. The behavior negatively impacted a crucial competition parameter—price—within a transparent market where prices are easily comparable. Furthermore, the products, i.e. televisions, involved were homogeneous and largely substitutable.
In terms of the legal context, the ACM notes that resale price maintenance constitutes a "hardcore restriction" under the General Block Exemption Regulation. While the Super Bock ruling established that this does not automatically lead to the assumption of a restriction by object, the ACM concluded that in this case, due to the level of coordination and the analysis of the economic context, there is sufficient reason to assert the presence of such a restriction. Finally, the ACM dismisses LG’s reliance on the argument concerning inter-brand competition by simply referencing the Samsung decision and the Visma ruling cited within it. The ACM clarifies that it is not required to investigate whether the behavior also diminished inter-brand competition, as this inquiry is only relevant at the effects stage of the analysis. If a restriction by object is proven, an effects analysis does not need to be conducted.
Takeaways and remarks
- Further scrutiny vertical price cartels: A few years ago, the ACM announced it would take a tougher stance against vertical price cartels (see, for example, the 'Guidelines on Agreements Between Suppliers and Buyers' and the campaign 'Who Sets the Price'). This is the second time the ACM has imposed a fine on an undertaking for engaging into a price fixing cartel with retailers. Before, the ACM decided to fine Samsung in a case with similar facts, which was upheld in court. The outcome of these two cases is therefore particularly important for undertakings communicating RRPs to retailers, as these must be true recommendations and not disguised practices of price fixing;
- Intra-brand and inter-brand competition: The ACM steers away from researching intra-brand and inter-brand competition by stating that there is an object restriction, which does not require an analysis of the effects on competition.
- Price is, and remains, an important competition parameter on a transparent market: Bolstered by the Samsung case, the ACM followed a similar approach, emphasizing that price is a key competitive parameter in a transparent market, particularly when prices are readily accessible through price comparison websites. The ACM underlined that in such markets, where consumers can easily compare prices, any interference with the pricing mechanism, such as persistent price-setting requests by a supplier, can significantly distort competition. This reasoning was central to the ACM’s conclusions regarding LG's practices.
LG has publicly announced it will appeal the case to the Dutch administrative court in Rotterdam. Given the outcome for Samsung at that court and the similarities between the two cases, we expect that LG will have a hard time overturning the ACM decision there. A judgement by the District Court of Rotterdam can still be appealed at the Trade and Industry Appeals Tribunal (College van Beroep voor het bedrijfsleven).
