The Finnish Competition and Consumer Authority (FCCA) proposes that the Market Court impose a penalty of EUR 9 million on Isojoen Konehalli Oy (IKH) for engaging in illegal resale price maintenance (RPM). In addition, the FCCA orders IKH to stop imposing a minimum price on its retailers and agreeing on a fixed resale price in the IKH online store. The prohibited RPM concerned the sale of IKH products throughout Finland. The infringement began in 2010 and is still ongoing in certain respects.
IKH is an import and hardware company that sells products directly to consumers and to a large number of retailers. IKH has set recommended prices for the products it sells, and it has pressured its retailers to comply with these prices in different ways. In practice, this has prevented price competition between IKH’s retailers and increased prices for the products sold to customers.
IKH has monitored its retailers’ pricing and contacted retailers whose prices have been below IKH's rec-ommended prices. If the retailer has not complied with the required price level, IKH has removed discounts from the company, forbidden retailers from using the IKH trademark, suspended deliveries or terminated a retailer's sales cooperation agreement.
IKH also maintains an online store where IKH and its retailers belonging to the IKH retail chain can sell products to consumers. All retailers that have joined the IKH online store under a separate agreement have agreed to comply with the same fixed resale prices for products sold via the IKH online store. IKH has also persuaded retailers to join the e-commerce agreement with various incentives.
The FCCA started investigating the matter when it was informed of this conduct by an IKH retailer. In 2015, the FCCA carried out unannounced inspections at IKH’s and its retailers' premises.
The amount of the penalty proposed to IKH is based on an assessment of the detrimental nature and extent of IKH’s practices. RPM is one of the most serious restrictions on competition.
“Retailers must be able to decide on their own pricing. Even recommended prices are prohibited and detrimental to price competition if retailers are actually being pressured to comply with minimum prices. This kind of activity prevents price competition between retailers and increases the prices consumers pay for products”, says Timo Mattila, Director General of the FCCA.
The FCCA has previously proposed imposing a penalty for illegal RPM in 2010. Prohibited RPM is not necessarily recognised as easily as violations such as cartel agreements between competitors, and RPM is probably more common than expected. Retailers may also refrain from disclosing contractual practices amounting to RPM to advance their own business interests.
The FCCA's decision to order IKH to stop the illegal RPM is effective from this date (20 May 2020). Moreover, the FCCA has submitted a proposal for imposing penalties to IKH to the Market Court. A more detailed description of the infringement can be found in the FCCA’s decision and penalty proposal.
FCCA decision and proposal to the Market Court (in Finnish)
Head of Research Jarno Sukanen, tel. +358 29 505 3352
Senior Adviser Pekka Mattila, tel. +358 29 505 3324
Senior Specialist Jussi Koivusalo, tel. +358 29 505 3831
What is resale price maintenance (RPM)?
- RPM refers to agreements and practices between a higher and lower level of sales – for example importer and retailer or manufacturer and importer – with the purpose of achieving a fixed or minimum price level.
- Fixed prices between different levels of sales are almost always prohibited and harmful, as they artificially raise prices to the detriment of consumers.
- RPM does not require a written agreement between the supplier and the retailer.
- RPM also includes influencing resale prices indirectly, for example by encouraging or pressuring others to comply with a certain price.
- Instead of pressuring and encouraging, RPM may also arise from an understanding between a higher and lower sales level. RPM is prohibited regardless of which level takes the initiative to agree on prices.