
EU fines Asus, Denon-Marantz, Philips and Pioneer $130M for online price fixing - Ours90
https://techcrunch.com/2018/07/24/eu-fines-asus-denon-marantz-philips-and-pioneer-130m-for-online-price-fixing/
======
ge0rg
It's funny how almost one hundred years after the Phoebus cartel[0], Philips
is still participating in anti-competitive behavior. Apparently the invisible
hand of the market is not so well suited after all.

[0]
[https://en.wikipedia.org/wiki/Phoebus_cartel](https://en.wikipedia.org/wiki/Phoebus_cartel)

~~~
hammock
This is not a cartel, it's resale price maintenance. And RPM is
controversially anti-competitive; for example it is legal in the US by Supreme
Court ruling.

~~~
gowld
And the reason why it's not "obviously" anti-competitive. A (non-monpolist) in
manufacture could sell direct-to-consumer its own product at whatever price it
likes. It could sell its products via consignment in many stores. So it's not
obvious why negotiating a more complex agreement with its reselling parters is
anti-competitive. As long as there are competing products in the store or at
other local stores, there is competitive pricing. If stores _also_ refuse to
stock competing products, _then_ you have a (local) monopoly, and that is when
the price controls run afoul.

~~~
shkkmo
It's clearly anti-competitive. The reason RPM exists is to prevent resellers
from competing with eachother on price.

What is controversial is whether this is something that should be allowed, not
whether it is anti-competitive.

~~~
dogma1138
It also helps To reduce price descrepency between small and large resellers in
both client base and market share which helps to prevent relative price hikes
in lesser served areas.

The question should be if the outcome of this is or is not beneficial to the
end consumer.

Manufacturers have an incentive to keep their prices as close to their MSRP as
possible and there aren’t many ways of doing that that are not anti-
competitive on paper.

However I don’t think that a reseller in London should be able to offer a
bette deal than a reseller in say New Castle or Leeds because they are bigger.

~~~
TheSpiceIsLife
> However I don’t think that a reseller in London should be able to offer a
> better deal than a reseller in say New Castle or Leeds because they are
> bigger.

While I agree a suburban / rural / remote customer shouldn't necessarily have
to pay more, how do we reconcile this with the idea of economies of scale?

If a larger retailer moves more units and can negotiate a better price from
the supplier shouldn't they be able to pass (some of) that saving on to the
retail customer?

I thought this is, at least one reason, why franchises existed, so retailers
can take advantage of bulk purchasing power?

~~~
hammock
>I thought this is, at least one reason, why franchises existed

Franchises are a licensing arrangement. You mean chain stores.

~~~
james_in_the_uk
Actually many franchises do work in this model. They are licensing deals and
buying clubs wrapped up together.

------
cepth
Question for any lawyers/legal observers out there:

What exactly did these companies do wrong?

From the article, 'If those retailers did not follow the prices requested by
manufacturers, they faced threats or sanctions such as blocking of supplies.'

Does this imply that any retailer in the EU has a legal right to sell goods at
any price? If I'm a retailer reselling Asus or Phillips products at cost in
order to gain market share, how is that not anti-competitive behavior as well?
I don't understand why suppliers cutting off supplies to retailers is anti-
competitive in this case.

As anyone who has done business with Amazon through Vendor Central can attest
to, Amazon gives you no ability to control the sale price of your goods. Their
pricing algorithms automatically adjust the price on most items "Sold and
fulfilled by Amazon.com" to be the lowest on the internet.

To me, there is a very troubling extension of the EU's logic here. Quite
famously, the high end cookware manufacturer Wusthof tried to prevent Amazon
from selling its products, since Amazon was undercutting the value of its
brand by offering massive discounts over prices on Wusthof's own site, and its
brick and mortar distribution channels.

Does this mean that under this EU ruling, that Amazon could sue Wusthof for
attempting to "block" its supply of Wusthof goods?

To take it a step further, Amazon lost money on each early-model Kindle sold.
If Amazon attempted to rapidly gain market share in say the chocolate market
by reselling Lindt or Godiva chocolate slightly below cost, how does the anti-
trust law work out here? Amazon would arguably be engaging in anti-competitive
behavior, while the chocolate maker could be fined for telling Amazon it
planned to withhold future supplies?

I'm generally a big supporter of consumer rights legislation and enforcement,
but this makes me wonder if the EU is going too far. Their ruling seems to
have the potential to open up a huge can of worms, and may actually entrench
the monopoly power of larger ecommerce sellers.

~~~
Aloisius
> Does this imply that any retailer in the EU has a legal right to sell goods
> at any price?

Generally speaking? Yes.

But there are a whole lot of exceptions to that. Books in most EU countries
have a price fixed by the publisher. Predatory pricing is illegal.

> If I'm a retailer reselling Asus or Phillips products at cost in order to
> gain market share, how is that not anti-competitive behavior as well?

It can be considered predatory pricing if competitors can't sustain equal
prices without going out of business and you can raise prices later.

> Does this mean that under this EU ruling, that Amazon could sue Wusthof for
> attempting to "block" its supply of Wusthof goods?

The anticompetitive nature and legality of vertical restraints (single
supplier to retailer) aren't quite as clear-cut as horizontal ones (multiple
suppliers or distributors or retailers between themselves).

Manufacturers have been allowed a certain amount of control over their
distribution agreements like requiring enforcement of Minimum Advertised
Pricing or quality standards for retailers, but each situation is analyzed on
a case-by-case basis to the effects of the ban and if there is legitimate
justification.

~~~
TheSpiceIsLife
> It can be considered predatory pricing if competitors can't sustain equal
> prices without going out of business and you can raise prices later.

Isn't this the tech-VC model? Create a "new" product (same as the old product
but ignore regulation), burn venture capital till the traditional players
fold, profit.

Okay, I'm thinking specifically of Uber. But stil...

~~~
zaarn
Basically yes. That kind of stuff, atleast in Germany, is frowned upon.
Competing on the market on pure merit is preferred. However, it doesn't mean
that if you can do it cheaper that's disallowed, quite the opposite.

If you _can do it cheaper_ it's explicitly encouraged and that's what these
policies try to encourage. What they discourage, is as you say, burn money to
drive out other players, then run at the same price as the previous players.

It's also somewhat why the EU fined google, at least in part, because Google's
behavior did not allow phone vendors to compete on their merit in the market
by being unable to offer alternative Android variants if they want Google's
variant.

It's a different free market philosophy than the US free market similarly to
how other philosophies (like Freedom of Speech) work different in the EU.

------
JazCE
This doesn't surprise me. Having been in the market for a AV Receiver
recently, I was amazed at how little fluctuation in price there was between
all the online stores for the likes of Denon and Marantz equipment.

~~~
agumonkey
Am sad to see glorious brands like these in this kind of news. I guess the AV
era is mostly gone and they tried the obvious first trick in the hat to keep
going.

~~~
stinos
_I guess the AV era is mostly gone_

I'm not sure. I mean, I hope it never will be. At least I think there are
actually a lot of people like me: once I heard (as a kid already) the huge
difference between what even a moderately proper hi-fi system makes music
sound like in comparision with e.g. some portable radio or (god forbid) laptop
speakers or even highly rated headphones, I cannot imagine not wanting that.
Though I admit for video I care _way_ less. But that's just because I watch
things mainly for the plot and not for the visual effects.

~~~
aidenn0
My daughter had some friends over to watch a movie, and we had just moved. I
had not yet unpacked my speakers, but I had some el-cheapo bookshelf speakers
scavenged from a circa 2000 HTIB. I set up just the RLCs and subwoofer, and
did some basic equalization.

Nearly every single kid commented on how good the sound was. Several insisted
it must be a surround-sound system. As far as I could tell, none of them had
ever watched a movie with anything but the speakers built-in to their
television.

~~~
Sharlin
I don't think the vast majority of households has _ever_ had any external
speakers connected to their TV.

------
thefounder
Now they should go over Dolby and HDCP 2.2 requirements that render good
equipment obsolete and forces you to "upgrade" so that you can watch content
you already paid for.

~~~
JazCE
that's nothing to do with price fixing.

~~~
cptskippy
It's planned obsolescence which is arguably worse. Price fixing doesn't create
a steady demand. With planned obsolescence you can reliably predict demand.
Combine that with price fixing and you've got yourself a pretty reliable
revenue stream.

------
Const-me
I don’t understand why did Asus, Philips and others do that? Why do they care
about retail prices? They’re not earning retail price, they offer their
products to retailers for wholesale prices. They’re manufacturers, can’t they
always adjust that wholesale price however they see fit?

~~~
jdietrich
Retail price maintenance protects the manufacturer's margin. If your retailers
get into a price war, their margin will get squeezed down to almost nothing.
At that point, they'll either drop your product, nudge customers towards an
alternative product that they can make a profit on, or demand bigger discounts
from the manufacturer. If your retailers can't make a healthy profit from
selling your product, they're not particularly inclined to sell it.

Excessively tight retail margins also degrade the customer experience. As a
manufacturer, you generally want retailers who can provide good pre- and post-
sales support. If a retailer makes almost nothing from selling a product, they
aren't particularly inclined to help customers. They'll spend more time
upselling accessories or additional warranties than actually advising the
customer and will just deflect all problems to the manufacturer.

[https://en.wikipedia.org/wiki/Resale_price_maintenance](https://en.wikipedia.org/wiki/Resale_price_maintenance)

~~~
rhizome
How does competition between resellers change the wholesale price, from which
(AIUI) the manufacturer's margins are derived?

~~~
jdietrich
I offer a product with a wholesale price of €149 and a recommended retail
price of €249. Competition between retailers pushes down the actual retail
price to €169. Online retailers can make a sliver of profit at that price, but
for brick and mortar retailers it's pretty much a break-even proposition.
Those retailers will come to me saying "We can't make any money selling your
product. Unless we can get a bigger discount, we'll have to discontinue
stocking it". I either lose my presence in retail stores and the sales volume
that goes with it, or I have to eat into my margins to keep those retailers on
board.

If I do eat into my margins, there's a good possibility that the online
retailers will figure it out and demand a discount too. Big online retailers
have good market intelligence resources and considerable negotiating power, so
they can demand as good or better wholesale prices than anyone else despite
having very low overheads.

Left unchecked, everything converges to the margin. I'm making _just enough
money_ that it's worth keeping production running, most retailers are making
_just enough money_ to justify the shelf space, but we're just barely scraping
by. I can't afford to invest in R&D, so I just churn out cheap me-too
products. Retailers with high overheads will be driven out of business,
leaving only the most efficient of box-shifters. Customers get low prices, but
very little more. Sound familiar?

------
bitL
So should ASUS start selling their stuff in their own "ASUS Stores" only to
bypass this? They obviously want to avoid imminent race to the bottom and
commodification of their high-margin models (if there are any).

How does this differ from US-wide enforcements of MAP (Minimum Advertised
Price) where even e.g. Amazon is fully complicit?

~~~
sfifs
Manufacturers generally don't want to be big in retail because that would
require them to hold a lot of working capital as inventory. Apple is fairly
unique in this regard because of the hefty price premium they command. eCom
still works out because you can aggregate orders to the factory supply chain
and that smoothes out some of the demand variability.

~~~
johnchristopher
You can also buy from HP, Lenovo and Dell. Apple is not fairly unique.

~~~
toyg
I think parent meant retail as brick&mortar. The ones you mention do direct
sales, which is a bit of a different game.

~~~
johnchristopher
Oh, you are right. HP products can be bought in stores though but indeed I
can't think of any brick and mortars computer shops like Apple.

~~~
komali2
Don't forget Microsoft! They have indicated a total interest in brick and
mortar skin in the game with all their surface stuff.

------
tgtweak
So where do the proceeds of this fine go? Do they do back to the purchasers of
said products like in a class action? Similar question for the anti-trust
fines...

~~~
DomreiRoam
from another case but should be the same principle
[http://europa.eu/rapid/press-
release_MEMO-09-235_en.htm?loca...](http://europa.eu/rapid/press-
release_MEMO-09-235_en.htm?locale=en#content)

 _Where does the money go?

Once final judgment has been delivered in any appeals before the Court of
First Instance (CFI) and the Court of Justice, the money goes into the EU’s
central budget, thus reducing the contributions that Member States pay to the
EU._

~~~
TheArcane
So it basically goes to every EU member country.

~~~
Cthulhu_
In theory, yes, or more directly, it's a discount for contributions. But in
practice, it's more complicated.

I don't even know where all the EU money goes to. Bailing out Greece and co?
Subsidies?

~~~
foepys
Germany, the country that "bailed out" Greece the hardest, made big returns
from it: 2.9 billion Euro since 2010 alone, with more profits on the horizon
[1]. German defense contractors also sold some submarines even though Greece
was effectively not able to buy them [2] and some regional Greek airports were
bought by a large German airport company [3].

You can't deny that at least Germany made hefty profits from "bailing out"
Greece.

Sources in German (maybe DeepL can help translate):

1: [http://www.spiegel.de/wirtschaft/soziales/griechenland-
hilfe...](http://www.spiegel.de/wirtschaft/soziales/griechenland-hilfe-
deutschland-macht-2-9-milliarden-euro-gewinn-a-1214134.html)

2: [https://www.heise.de/tp/features/Griechische-Milliarden-
fuer...](https://www.heise.de/tp/features/Griechische-Milliarden-fuer-
deutsche-U-Boote-3386247.html)

3: [https://www.tagesspiegel.de/wirtschaft/griechenland-
fraport-...](https://www.tagesspiegel.de/wirtschaft/griechenland-fraport-
kauft-14-regionalflughaefen/12202008.html)

~~~
claudius
So far and iff Greece does pay back the remaining debt. It’s not entirely
uncommon for a lender to make some money from interest before the other party
defaults and the lender loses its investment. Could you explain why this is
controversial? Should Germany have donated funds to make up for the
mismanagement of the Greek government?

~~~
foepys
It isn't controversial for me. I think it's correct to make a bit of money off
of it, especially after Greece lied their way into the EU with fraudulent
accounting. However, GGP said that the EU more or less donated money to Greece
and that is just not factually correct.

In fact, GGP is also wrong in indirectly claiming that subsidies are bad.
Every country on earth gives out subsidies to its economy and as the EU acts
like a country in many ways (esp. wrt trade), it should give out subsidies to
its economy.

GGP just tried to bash the EU with baseless arguments, as it almost always
happens in such threads.

------
close04
Are these fines in any way based on the projection of the revenue coming from
applying the illegal practices? So what I'm asking is did anyone try to
calculate how much money they might have made from this and apply a fine that
nullifies all those profits, to which they add a penalty for doing it in the
first place?

~~~
teamhappy
Here's the algorithm used to set the fines: [https://eur-lex.europa.eu/legal-
content/EN/TXT/HTML/?uri=CEL...](https://eur-lex.europa.eu/legal-
content/EN/TXT/HTML/?uri=CELEX:52006XC0901\(01\)&from=EN)

------
kinnth
All mature markets become cartels. The illusion of a free market is maintained
to ensure monopoly are not formed but almost all mature markets are some form
cartel.

~~~
Gibbon1
I remember as a kid reading The Pearl by John Steinbeck. I didn't forget the
part where all the buyers in the town were part of a cartel. It's a given that
eventually established businesses will start to collude with each other.

------
Rotdhizon
Now to get someone to investigate the RAM market for its blatant price fixing

~~~
zeusk
Huh, so if prices are high then blame them on fixing and collusion? What
blatant proof do you have?

They aren't setting any minimum floors or requiring retailers to set any
floor. Heck, they don't even sell to retail directly anymore.

~~~
deelowe
The price for dram chips has remained suspiciously high for a few years now
(right around the time DDR4 came about). There's no smoking gun, but there
have been lawsuits [1] and given the amount of consolidation that's happened
in the dram business, it wouldn't be a surprise if there's more to the story.
A lot of water cooler talk is happening right now that something is going on.
Given that there is only 3 major players in the market these days with Samsung
doing most of the heavy lifting, it wouldn't take much.

[1] [https://www.techrepublic.com/article/samsung-hynix-micron-
su...](https://www.techrepublic.com/article/samsung-hynix-micron-sued-for-
dram-price-fixing-that-could-have-raised-pc-prices/)

~~~
zeusk
> The price for dram chips has remained suspiciously high for a few years now
> (right around the time DDR4 came about).

There is no law about an upper ceiling on pricing. Would you say Nvidia is
price fixing because their volta products are priced "suspiciously high"?

> There's no smoking gun, but there have been lawsuits [1]

There are lawsuits like these left and right, read any company's 10-Q about
how random law firms file suits in the name of investor losses or consumer
rights. Doesn't mean those suit hold any ground.

> A lot of water cooler talk is happening right now that something is going
> on.

Seriously?

> Given that there is only 3 major players in the market these days with
> Samsung doing most of the heavy lifting, it wouldn't take much.

Still more diverse than Google Search, Microsoft Windows, Intel/AMD CPU,
Nvidia/AMD GPU.

Monopoly (or Tripoly?) does not equate to price fixing and collusion.

~~~
Moter8
>Would you say Nvidia is price fixing because their volta products are priced
"suspiciously high"?

No, but AMD would (I have no clue if they do) release a cheaper product and
therefore get the biggest market share.

The problem is not about Samsung setting a high price. It's about all three
companies setting that high price, seemingly together.

~~~
zeusk
> No, but AMD would (I have no clue if they do) release a cheaper product and
> therefore get the biggest market share.

And how many AMD cards have you seen being used for DL? Hint: 0

> The problem is not about Samsung setting a high price. It's about all three
> companies setting that high price, seemingly together.

Parent is implying collusion and fixing on the sole basis of prices being
above historical means, that's not price fixing.

Also, you're describing price fixing, not providing an evidence that it is
possibly taking place. I work in Azure, so I know quite a bit about the
current pricing environment around semis. It isn't as much as fixing as is the
sudden explosive demand for their products.

* Take a look at the historical earnings for these companies, they were barely scraping by a couple years ago (Micron was under >$10B debt which was more than 50% of their market cap at the time). You can't justify capex on growing supply when you don't even have money to cover debt.

* Look at the trend of DRAM attach rates and software requirements for memory, nowdays everyone is happy running an entire instance of chrome for their communication, editor and what not; Deep Learning and data economy have taken off in the past few years which is requiring records amount of both logic and memory chips.

The current prices are a function of demand and supply. I do see them heading
slightly lower on better margins due to lower debt and better yields on more
mature processes (possibly even 1Y nm process node this year) but we'll be
here for a while without any price fixing.

------
abandonliberty
This must be legal in the USA?

So many companies do it and it's not even hidden.

~~~
alkonaut
Yes, “resale price maintenance” is legal in the US (by a Supreme Court
ruling).

I find it pretty hard to see why price fixing is better when dictated by a
manufacturer than by collusion between resellers.

------
dalbasal
Whether because our antitrust framework was successful, or just because things
change over time... This sort of "anti-competitive" behaviour is not the real
problem anymore.

These days, we have a handful of companies racing to be "the first traded
trillion dollar company," with a business model built around >50% market
share.

We have platforms, with their digital versions of the infrastructure-monopoly
problem, just without the capital cost part. We have social networks, with
their telephone-like network effects. The value (to users) is in everyone else
using it. We have ads-and-data businesses like Google, where the value to ad-
buyers grows exponentially with network size.

We have investors betting on monopolies. Peter Thiel's definition of monopoly
(the only worthwhile strategy) is basically a spectrum. On one end you sell
commodities, at cost. On the other end you have a perfect monopoly. Invest in
ideas closer to the 2nd type.

All sorts of powerful reasons for companies to cut themselves an island of
monopoly. All reasons that are not economies of scale. If monopolies really do
come with stagnation, higher prices and such... We are headed for trouble. Our
current antitrust frameworks don't touch on most of the problem. The likes of
fb just don't fit into it.

Price fixing, pricing power, dumping and such are the symptoms of last year's
flu, not this year's.

------
patrickaljord
When companies charge too much, EU fines them for monopoly abuse, when they
charge too low, EU fines them for dumping prices, when they charge the same,
EU fines them for price fixing. It's almost as if laws were designed to fill
EU's pockets.

~~~
owenversteeg
These fines are rare and the amounts are comparatively small. €120MM is
peanuts to the EU. The intention of the fines is not to make money but to
discourage illegal behavior.

Specifically, EU fines represent about 3% of EU revenue. The funds from the
fines may not be used until the fine has passed all chances of being
overturned by courts, which can take up to 8 years.

Finally: the fines reduce EU funding from member countries by the same amount.
Even if the member nations decided to subsequently give more money back to the
EU, there is a cap on how much money the EU can take.

~~~
dontnotice
> The intention of the fines is not to make money but to discourage illegal
> behavior.

Of course fines are a revenue source, the EU operates on multiyear fixed
budged which they supplement with fines and tariffs.

The bulk of that wealth transfer is reliant on the coffers of US companies.

~~~
sctb
Since this is basically all you post about, you're breaking this guideline:

> _Please don 't use Hacker News primarily for political or ideological
> battle. This destroys intellectual curiosity, so we ban accounts that do
> it._

[https://news.ycombinator.com/newsguidelines.html](https://news.ycombinator.com/newsguidelines.html)

~~~
dontnotice
It's not a battle it's a legitimate point of view. It's also backed by
evidence.

Also I balance it with the variety in my submissions.

------
SubiculumCode
For what it is worth I chose not to buy my motherboard from ASUS today, and
chose another company (who may be doing other things, but idk).

------
azernik
So much for the narrative that the EU's tough anti-trust policy is about
keeping out US companies.

------
paidleaf
No jail? As an example, if a group of multinationals illegally fix prices and
gain $1 billion in extra profits and they get a tax deductible $130 million
fine, where is the deterrence?

~~~
vertex-four
Of course, if they were given a fine anywhere near the effect on the economy
they had, this very forum would be decrying the EU for being overbearing and
anti-business.

~~~
icelancer
Not likely. This forum is very anti-price-fixing and anti-competitiveness,
especially with regards to headhunting and wages like Apple/Google had.

~~~
contravariant
Responses were somewhat mixed to the recent Google fine though.

~~~
nutjob2
I think people here are liable to see Android as a public good, compared to
its competition.

------
baybal2
I am greatly, greatly surprised to see that Asus and other Taiwanese
electronics brands still try to play these games given they haven't been
present in high end markets for ages.

Really, we are talking about difference in between them selling 250 euro
laptops vs 270 euro laptops.

Taiwanese consumer electronics industry got, kinda, ossified.

Their mainstream products are almost as boring as "white goods" these days.

~~~
mtgx
Not sure what has happened to Asus in the past few years, but the same laptop
class at a given price range now has a significantly lower build quality than
<2014\. I don't know if it's them making retailers take these deals and
getting lazy, Intel forcing higher and higher prices on them and them not
being able to push the prices to consumers, RAM/SSD prices becoming higher, or
what. Either way it's been disappointing to see them go down this path because
they're going to lose whatever brand loyalty they had.

~~~
bhouston
ASUS doesn't have a response to the Dell XPS line. ASUS just has cheap feeling
"gaming laptops" last time I checked.

~~~
JazCE
I would say the Asus Zenbooks were generally the response to the XPS line. I
must admit I haven't looked at them for a while, but the original Zenbook
UX510 (I think) was pretty damn good, but rather pricey. I always felt that
Asus were a step up from ACER.

~~~
tormeh
Have both Acer and Asus. Can confirm. Acer is trash. Asus is as good as any
I've used.

This thread has people hailing Dell and HP as quality laptops. In other
threads, there is no end to the troubles people have with Dell XPS. HP has a
poor reputation as far as I remember, without remembering any specifics,
except that they had overheating issues at one time.

I guess the difference is probably between business and consumer laptops,
where the former tends to be Dell or HP? Except Acer, as noted, because Acer
is trash. Don't buy Acer.

~~~
flamelover
Dell is also trash, I've purchased two Dell laptop, lots of problems come with
them.

It's because it's expensive paid repair service so I bought it, but I don't
think I really like to repair my laptop so many times. (And not to mention
classic power adaptor problem with has built-in it for pretty long time)

For Asus and Acer, we always joked them with a "built-in timer", they will
break when time is up. Just like all those eco-friendly things. Very
environment-friendly company.

