On 2 February 2017, the European Commission started formal antitrust proceedings against D&M Holdings Inc. (Denon & Marantz) and all companies directly or indirectly controlled by them. The investigation relates to suspected agreements to fix the retail price or fix a minimum selling price on products sold in the Economic European Area.

The Commission suspects that Denon & Marantz may have breached EU rules aimed at preventing anti-competitive practices and is investigating whether D&M made agreements with its retailers to fix retail prices or forced its retailers to keep prices at or above a minimum sale price.

Article 101 of the Treaty prohibits cartels and other agreements that could disrupt free competition in the European Economic Area’s internal markets and prohibits agreements between two or more market players that might limit competition. It covers agreements between actual or potential competitors and as in this case, agreements between a manufacturer and its distributors and retailers.

The Commission is investigating whether Asus, Denon & Marantz, Philips and Pioneer have breached EU competition rules by restricting the ability of online retailers to set their own prices for widely used consumer electronics products such as household appliances, notebooks and hi-fi products.

Commissioner Margrethe Vestager, in charge of competition policy said:

“E-commerce should give consumers a wider choice of goods and services, as well as the opportunity to make purchases across borders. The three investigations we have opened today focus on practices where we suspect companies are trying to deny these benefits for consumers. The cases concern the consumer electronics, video games and hotel accommodation sectors. More specifically, we are looking into whether these companies are breaking EU competition rules by unfairly restricting retail prices or by excluding customers from certain offers because of their nationality or location.”

The effect of these suspected price restrictions may be aggravated due to the use by many online retailers of price tracking software that automatically tracks retailer prices. As a result, the alleged behavior may have had a broader impact on overall online prices for the respective consumer electronics products.

The Commission is carrying out this in-depth investigation on its own initiative.

Our Perspective
A competitive market generally encourages companies to offer its consumers, products at the most favorable terms. It also encourages efficiency and innovation which often leads to better products and lower prices. Competition between sellers needs to exist without ‘artificial’ constraints and rely on the ‘natural’ competitor pressures of the market in order to be effective.

At the same time manufacturers have a responsibility to protect their brand and markets and support their channels. For example it is not in the interests of brands or consumers to have a situation where the market is dominated by 1 or 2 players (I’m thinking Amazon here!). Its not healthy for the brand to rely on 1 or 2 powerful retailers that can dictate terms and shut out the smaller retailers and its not healthy for consumers who are restricted to choice of seller and competitor price transparency. Brands need to focus on strategies that support their channels in positive ways such as rewarding them for marketing initiatives and not punish them by restricting their ability to compete in their markets.

Link to the EU Commission press release here.