It’s likely to be a familiar phenomenon for web shops: a product is listed at a much lower price on a competitor's site. In practice, web shops then sometimes contact the supplier, for instance to negotiate the purchase price (retroactively). That is permitted, but it can go wrong if it leads to prohibited cartel agreements. In this blog, we address the main points to consider when web shops set the retail price.
A supplier must allow the web shop to set its own retail price
The cartel prohibition (Article 6 of the Competition Act and Article 101 TFEU) prohibits agreements between companies that restrict competition. The prohibition applies to agreements between competitors (horizontal), but also to agreements between suppliers and customers (vertical). High fines may be imposed for such agreements by the European Commission (the “Commission”) or the Netherlands Authority for Consumers and Markets (“ACM”).
An important ‘vertical’ rule is that suppliers must allow web shops to set their own selling price. A restriction on this freedom is likely to be deemed a violation of the cartel prohibition. This is known as vertical price maintenance.
Vertical price maintenance may take place either directly or indirectly. An example of a direct means is an agreement on a fixed or minimum selling price that a web shop must charge to its customers. Examples of indirect means are the granting of discounts if a certain price level is observed, and a supplier threatening sanctions if a customer fails to adhere to a certain price level, for instance by suspending deliveries or delaying orders.
Recommended retail prices are permitted, but ACM is strict
A supplier may advise web shops to charge a certain selling price. A supplier may also impose a maximum price, provided that it does not have the same effect in practice as a fixed or minimum price.
ACM strictly interprets the rules. It believes that the recommended retail price must be “entirely non-binding”. A supplier may also not “call a web shop to account” for its prices. Nor may a supplier “influence” a web shop's pricing in any other way, for instance by repeatedly reminding it of the recommended price. In the recent past, ACM has fined electronics groups LG and Samsung tens of millions of euros for allegedly exerting undue influence on retailers' online sales prices for televisions.
It is also sometimes permitted – subject to conditions – to temporarily impose a fixed resale price when introducing a new product, on entering a new market or during a short-term price reduction or promotion campaign.
What risks does resale price maintenance pose for suppliers and web shops?
Resale price maintenance has long been high on regulators' agendas. ACM has warned several suppliers in the past on the grounds of suspected violations, including suppliers of baby and children's products, building materials, bicycle and car accessories, batteries and personal care products. Under pressure from ACM, suppliers have been forced to set up internal compliance programmes and sent letters to their customers stating that retailers are free to set their own prices. It has recently become apparent that ACM is again investigating possible violations.
Suppliers were always at risk of high fines for resale price maintenance. In the past, Philips, Pioneer, Asus and Guess, among others, were fined millions of euros by the European Commission. As stated above, ACM imposed a fine of almost €8 million on LG and a fine of over €39 million on Samsung in the Netherlands, on the grounds that, according to ACM, both suppliers “directed price increases” of physical and web shops under the guise of price recommendations.
Buyers – such as web shops – also face a serious penalty risk if they participate in prohibited vertical agreements. In October 2024, two wholesalers of electrical equipment (Rexel and Sonepar) in France were fined €89 million and €96 million. The wholesalers allegedly entered into agreements with suppliers that effectively imposed a minimum sales price. And in November 2024, Ahlers, an exclusive distributor of Pierre Cardin, was fined €3.5 million by the Commission for restricting parallel trade.
Web shops beware
Web shops should therefore beware. In practice, we see that they regularly complain to suppliers about a competitor's price. This is permitted if, for instance, the aim is to negotiate a better purchase price (whether or not retroactively). However, the supplier may not be used as a means to keep the prices between web shops artificially high, for instance by asking a web shop to confront another shop for charging too low a price.
This blog has also been published on the thuiswinkel.org website.
Information on dawn raids by ACM and the European Commission can be found at invalacm.nl.
Information on the rules in online sales can be found at consumentenrecht.info.
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