03 Aug 2018

We thought we should make you aware of a recent development in the Retail and Consumer Goods space. The EU Commission has imposed fines totalling more than €100 million on the consumer goods suppliers, Asus, Denon & Marantz, Philips and Pioneer. Each of these businesses had taken steps to discourage online retailers from selling their products at prices which the suppliers felt were too low.

Whilst trying to control internet prices is not a new phenomenon, the use of pricing algorithms to assist with this activity is a new feature the Competition Regulators are keen to uncover and stamp out. The advent of the internet has made monitoring selling prices a much easier process, whether you are a consumer looking to buy a new TV or a supplier looking to monitor the activity of its resellers.

In this case, many of the online retailers used pricing software which monitored selling prices and automatically adapted the online retailer's prices to those of its competitors. This meant that if Asus, Denon & Marantz, Philips and Pioneer took steps to discourage the lower priced retailers from selling below the supplier's suggested selling price, this would keep selling prices at the correct level with most, if not all, of the other retailers selling the same product in the same region. The use of the price monitoring software also meant the suppliers could intervene swiftly whenever they discovered unacceptable price decreases.

The products affected by this latest activity included notebooks, headphones, kitchen appliances, and home theatre products, to name but a few. In a previous case, reviewed by the UK Competition and Markets Authority, the products whose prices were controlled by pricing software included posters and frames sold on Amazon's UK website. The director of one of the businesses involved in that case, Mr Daniel Aston, is spending time in a Spanish jail awaiting potential extradition to the United States to face charges of price fixing, having been arrested whilst on vacation with his family.

Why should you and your business be concerned by these developments?

If your business uses or has, in the past, used price scraping or price monitoring software, you need to understand what this software is designed to do, why it was put in place, and what the business does with the pricing information this software provides. In certain circumstances, the use of such software is unlikely to be a problem. In other instances, what the business does as a result of the software (or as a result of the pricing information the business receives), could expose you and your business to significant risk.

The use of pricing software (or algorithms as it is otherwise referred to) is of major interest to Competition Regulators throughout Europe and in other parts of the world. Their concern is that such software can be used to make price-fixing arrangements more effective, and make them more difficult to detect. If your business uses (or has used) such software, now would be a good time to check that the way it is used is not putting your business at risk of potential fines, competition damages claims, or sanctions for individual executives. This will not be the last case involving pricing software.

If you would like more information about this case or wish to discuss any specific concerns you may have, please contact Andrij Jurkiw, the Head of our Competition team in the UK, or his colleague, Angelene Duke.