Introduction
This essay examines the potential liability of Sharper, a major German manufacturer of smart televisions, under Article 101 of the Treaty on the Functioning of the European Union (TFEU). Article 101 prohibits agreements and concerted practices that may affect trade between Member States and have as their object or effect the prevention, restriction, or distortion of competition within the internal market. The case of Sharper involves several practices, including differential pricing for online and offline sales, restrictions on cross-border trade, potential price coordination with retailers, and refusal to supply an online platform. Drawing on relevant case law, this essay will analyse these conducts to assess whether they infringe Article 101 TFEU. The discussion will focus on vertical agreements, resale price maintenance (RPM), territorial restrictions, and refusal to supply, concluding with an evaluation of the implications for competition law enforcement.
Vertical Agreements and Differential Pricing
Sharper imposes a higher wholesale price on Beacon for Smart TVs intended for online resale compared to those sold in high street stores. This differential pricing raises concerns under Article 101 TFEU, as it appears to be part of a vertical agreement between Sharper and its distributors. Vertical agreements, while often pro-competitive, can infringe Article 101 if they restrict competition. In the case of Leclerc v Commission (1985), the European Court of Justice (ECJ) held that agreements imposing selective distribution criteria must not discriminate against certain distribution channels without objective justification (Leclerc v Commission, 1985). Here, Sharper’s policy discriminates against online sales without clear evidence of justification, such as protecting brand image or ensuring after-sales service quality.
Furthermore, differential pricing may indirectly restrict online competition, a significant concern in the digital single market. The European Commission’s guidelines on vertical restraints note that discriminating between online and offline channels can amount to a restriction by object if it aims to limit the growth of e-commerce (European Commission, 2010). Although Sharper’s policy may not explicitly ban online sales, the higher wholesale price could deter Beacon from competing effectively online, potentially infringing Article 101(1) TFEU. However, Sharper might argue that the practice is necessary to maintain a balanced distribution network, an argument that would require substantial evidence of pro-competitive effects.
Restrictions on Cross-Border Sales
Sharper prohibits Beacon from selling Smart TVs cross-border to consumers in other Member States, a practice that directly engages with Article 101 TFEU. Territorial restrictions in distribution agreements are generally considered hardcore restrictions under EU competition law, as they partition the internal market. The ECJ in Consten and Grundig v Commission (1966) established that agreements restricting parallel trade between Member States have the object of restricting competition, as they undermine the fundamental principle of a single market (Consten and Grundig v Commission, 1966). Sharper’s prohibition on cross-border sales by Beacon clearly aims to prevent parallel imports and maintain price differentiation across Member States, which is likely to be deemed a restriction by object under Article 101(1) TFEU.
Moreover, such restrictions cannot typically be justified under Article 101(3) TFEU, which allows exemptions for agreements that contribute to technical or economic progress while allowing consumers a fair share of the resulting benefits. The Commission’s Vertical Block Exemption Regulation (VBER) explicitly excludes territorial restrictions from its safe harbour provisions, reinforcing the view that Sharper’s conduct is likely to infringe Article 101 (European Commission, 2022). This practice arguably undermines consumer access to competitive pricing across the EU, thus warranting scrutiny.
Resale Price Maintenance and Concerted Practices
Another area of concern is Sharper’s involvement in pricing decisions among its retailers, Apollo, Beacon, and Vision. Although Sharper provides recommended retail prices (RRPs), the alignment of prices following Beacon’s discounting and Sharper’s subsequent communication with retailers suggests possible resale price maintenance (RPM). RPM, where a manufacturer dictates the price at which retailers sell products, is a hardcore restriction under Article 101(1) TFEU, as confirmed in Binon v Agence et Messageries de la Presse (1985), where the ECJ ruled that fixing resale prices constitutes a restriction by object (Binon v Agence et Messageries de la Presse, 1985).
Additionally, the CEO of Sharper’s text to Apollo’s sales manager, warning of a potential supply cut if Beacon’s discounting persists, could be interpreted as pressure to align prices, raising the possibility of a concerted practice. In Suiker Unie v Commission (1975), the ECJ held that even indirect contact between competitors, facilitated by a common supplier, can constitute a concerted practice if it reduces uncertainty about market behaviour (Suiker Unie v Commission, 1975). Here, the subsequent alignment of prices by Apollo, Beacon, and Vision after Sharper’s intervention suggests coordination, potentially violating Article 101. While Sharper might argue that RRPs are non-binding, the context of their communications and the resulting price uniformity casts doubt on this defence.
Refusal to Supply Rainforest
Sharper’s refusal to supply Rainforest, a US-based online retailer, citing the need to protect brand image, must also be assessed under Article 101 TFEU. Refusal to supply can infringe competition law if it forms part of an agreement or concerted practice that restricts competition. However, under EU law, a dominant firm’s refusal to deal typically falls under Article 102 TFEU (abuse of dominance) rather than Article 101. In United Brands v Commission (1978), the ECJ focused on refusal to supply under Article 102 for dominant firms (United Brands v Commission, 1978). Since the case does not indicate Sharper’s dominance (despite a 28% market share), liability under Article 101 seems unlikely unless the refusal is part of a broader anti-competitive agreement.
Nevertheless, if Sharper’s refusal to supply Rainforest is linked to its broader strategy of restricting online sales (as seen with Beacon), it could be viewed as part of a vertical agreement aimed at limiting e-commerce. The European Commission’s e-commerce sector inquiry highlighted that selective distribution systems rejecting online retailers without objective criteria may infringe Article 101 (European Commission, 2017). Sharper’s justification of maintaining brand image would need to meet strict proportionality and necessity tests, which, based on current facts, appears weak.
Conclusion
In conclusion, Sharper’s conduct raises multiple concerns under Article 101 TFEU. The differential pricing policy towards Beacon’s online sales likely constitutes a restriction of competition by discriminating against e-commerce without clear justification. The prohibition on cross-border sales is a hardcore restriction that partitions the internal market, almost certainly infringing Article 101(1). Furthermore, Sharper’s involvement in price alignment among retailers, particularly through communications discouraging discounting, points to potential RPM or a concerted practice. Finally, while the refusal to supply Rainforest may not directly violate Article 101 unless linked to a broader anti-competitive strategy, it reinforces concerns about Sharper’s approach to online distribution. These practices, if substantiated, could significantly distort competition within the EU internal market, warranting investigation by competition authorities. The case highlights the ongoing tension between manufacturers’ desire to control distribution and the EU’s commitment to a competitive single market, particularly in the context of growing e-commerce.
References
- Binon v Agence et Messageries de la Presse (1985) Case 243/83, ECR 2015.
- Consten and Grundig v Commission (1966) Cases 56 and 58/64, ECR 299.
- European Commission (2010) Guidelines on Vertical Restraints. OJ C 130/1.
- European Commission (2017) Final Report on the E-commerce Sector Inquiry. COM(2017) 229 final.
- European Commission (2022) Vertical Block Exemption Regulation. Regulation (EU) 2022/720, OJ L 134/4.
- Leclerc v Commission (1985) Case 229/83, ECR 1.
- Suiker Unie v Commission (1975) Cases 40 to 48, 50, 54 to 56, 111, 113 and 114/73, ECR 1663.
- United Brands v Commission (1978) Case 27/76, ECR 207.
