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ACM fines LG for illegal price-fixing agreements involving television sets

The Netherlands Authority for Consumers and Markets (ACM) imposes a fine of almost 8 million euros on LG Electronics Benelux Sales (LG). From 2015 through 2018, LG concluded illegal price-fixing agreements with seven large retailers on the online retail prices of television sets.

Martijn Snoep, Chairman of the Board of ACM, explains: “Under the pretense of ‘price recommendations’, LG coordinated price increases of retailers to the recommended price that LG provided. LG’s practices disrupted competition between the retailers, and that resulted in higher prices for consumers.”

Every retailer must set their own retail prices. Suppliers may only give retailers non-binding price recommendations. LG is well aware of this. This has been indicated in the work instructions to LG staff. Nevertheless, LG did more than just give a ‘recommendation’.

How did it work?

LG provided price recommendations to retailers that sold LG television sets and requested them to also actually charge these prices. In that context, LG also indicated that it took action to bring the retail prices of other retailers in line with the recommended prices. The retailers subsequently complied with LG’s request. LG consistently confronted retailers if they charged retail prices that were lower than the recommended prices. In addition, LG requested retailers to refrain from advertising specific special deals on price comparison websites. LG also requested retailers to refrain from automatically following lower prices of other retailers. Furthermore, LG requested retailers not to indicate possible discounts at checkout online; consumers only got to see the discounts upon checkout of the television set.

LG assessed using online monitoring tools whether retailers charged lower prices than the recommended prices. In addition, retailers complained to LG when, according to them, competitor retailers used too low prices . In such cases, LG contacted the retailers in question, demanded an ‘explanation’ and urged them to increase their prices: “Please carry out the following recommendation immediately”.

In WhatsApp messages and emails, LG indicated that it had urged or would urge other retailers : “We have issued recommendations to all partners”.

The online stores responded to LG having followed the ‘recommendation’, for example, by using a thumbs up 👍, a ✅, or messages such as: "I am going to take care of it", "adjusted", and “done”, or “check”.

Conversely, the retailers requested LG to confront competitor retailers when they charged prices that were lower than the recommended prices. For example, a retailer sends LG a couple of screen shots with prices of other retailers and requests LG: “Are you going to police this today?”. LG replies: “We’ll take care of it”. The retailer subsequently sends an emoji of a police car: “🚓”.

ACM has thousands of messages and documents which show these illegal price-fixing agreements. As LG constantly informed retailers, they knew that they would not price themselves out of the market if they followed LG’s price. In that way, LG unduly interfered directly in the competition between retailers. Through this price coordination, LG protected both its own profit margins and the retailers’ profit margins. As a result, the television sets were not sold at the most competitive price, which is at the expense of consumers.

What is and what is not allowed between suppliers and buyers?

Every retailer must set their own retail prices. Suppliers can also give retailers non-binding price recommendations. Monitoring online retail prices by suppliers is, in and of itself, allowed. However, the prices recommendations must remain non-binding. Suppliers are not allowed to exert pressure in any way, shape or form on its retailers, nor are they allowed to inform retailers about pricing strategies of competitor retailers. Suppliers that influence the prices of retailers by, for example, informing those retailers about the prices of competitor retailers go too far. The same goes for retailers complaining to suppliers about the retail prices used by other retailers. Suppliers must ignore such complaints.

ACM has launched an awareness campaign to warn suppliers and retailers about prohibited vertical price restraints under the title “Who determines the price” (in Dutch). In its campaign, ACM explains to market participants what rules they need to comply with.

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