Vertical information exchange enabled by web crawlers, price comparison sites, and spider software under the competition rules following Samsung (2021)
In its fining decision of 14 September 2021 regarding Samsung, the Netherlands Authority for Consumers and Markets (ACM) imposed a fine of over EUR 39 mln on Samsung Electronics Benelux B.V. (Samsung) (the Decision). According to ACM, Samsung coordinated the retail prices of Samsung television sets together with various retailers by exercising undue influence on the online retail prices of television sets of seven retailers.
ACM accuses Samsung of having tried to prevent a downward price spiral by de facto announcing market prices from 2013 to 2018. While reiterating that monitoring online retail prices by suppliers is, in and of itself, permitted, ACM found that the market transparency resulting from price-comparison websites, retailers’ online stores, and spider software allowed Samsung to analyse carefully the price fluctuations of its own television models and contact retailers, if necessary.
Taking the Decision as a starting point, the question is how competition law should classify vertical information exchange on pricing when it is enabled or facilitated by web crawlers, price comparison sites and spider software. Does such exchange of information warrant a more flexible approach under competition law, or, as adopted by the ACM in Samsung, a stricter approach? From an economic perspective the question could be framed as: is the exchange of information between a manufacturer and resellers more likely to lead to higher prices in a situation where price comparison websites lead to price transparency, compared to a situation without price comparison websites?
Assessment of restrictions in a vertical relationship, legal qualification in the Decision as by object restriction
For the assessment of restrictions in a vertical relationship, the starting point is that such restrictions should be assessed differently from horizontal agreements.
As is pointed out in the (old and new) Vertical Guidelines, this is due to the complementary nature of the activities carried out by the parties to a vertical agreement, which generally implies that pro-competitive actions by one party to the agreement will benefit the other party to the agreement and will ultimately benefit consumers.
By contrast to horizontal agreements, the parties to a vertical agreement therefore tend to have an incentive to agree on lower prices and higher levels of service, which also benefit consumers.
Similarly, a party to a vertical agreement usually has an incentive to oppose actions by the other party that may harm consumers, as such actions will typically also reduce the demand for the goods or services supplied by the first party.
Moreover, the complementary nature of the activities of the parties to a vertical agreement in putting goods or services on the market also implies that vertical restraints provide greater scope for efficiencies, for example by optimising manufacturing and distribution processes and services.
Nevertheless, undertakings with market power may, in certain cases, use vertical restraints to pursue anti-competitive purposes that ultimately harm consumers.
Taking account of this, price influencing is, unlike fixed prices, not necessarily prohibited in a vertical relationship. Suppliers can, for example, give retailers non-binding price recommendations or impose maximum pricing.
Nevertheless, ACM finds that there is a case of illegal price fixing where Samsung requests a price increase, and the retailers explicitly or tacitly comply with such a request. ACM qualifies Samsung’s communication with retailers as a restriction by object. To qualify as a restriction by object, it follows from Budapest bank that it must be possible to presume based on experience that the behaviour concerned causes a sufficient degree of harm to competition.
Strict test by ACM justified?
The answer to this question is highly relevant from the point of view of economic efficiency. Indeed, for vertical relationships to be efficient (and thus competition to be effective), a degree of coordination between parties is required. Coordination requires information exchange, and it should therefore not be condemned without clear evidence of harm.
In this case ACM has arguably overstepped the mark by assuming harm in respect of price influencing that does not amount to RPM. Moreover, given the fact that ACM’s (implicit) assumptions – (i) that competitive dynamics between retailers because of the transparency in the market through web crawlers, price comparison sites and spider software necessarily result in lower prices; (ii) lower prices are, by definition, beneficial to consumers (without consideration of other parameters of competition, such as innovation and advice); and (iii) an agreement, or a concerted practice between Samsung and the individual retailers can be established based on an alleged common interest between Samsung and the retailers in the protection of the margin of retailers and Samsung - there is as much reason to be less strict: to require evidence of harm.
|This blog was written by Pim Jansen for the IGIR and METRO Faculty of Law Maastricht #COMIPinDigiMarkts2022 project - More blogs on Law Blogs Maastricht
This blog is part of the project #COMIPinDigiMarkts2022. These blogs have been specially prepared by participating internal and external project members and focus on competition law and IP law, with particular reference to the digital markets.