Omnichannel sales policy and pricing conditions for pure players (Update Distribution / Competition, oct. 2020)

Online sales represent both an opportunity and a threat for certain companies which may be tempted to discriminate such a sales channel whose characteristics do not correspond to their expectations or which disrupts their omnichannel sales policy, but whose, they cannot do without. The French Competition Authority (Autorité de la concurrence : AdlC) ensures compliance with the competition rules applicable to omnichannel commercial policies.

The general framework of price differentiation

If the general terms and conditions of sale (GTCS) constitute the basis of the commercial policy defined by the seller and applicable in principle to all its customers, these GTCS do not prevent the seller from having a differentiated approach by customer or group of customers, in particular to grant more targeted price reductions. Three pricing differentiation techniques are legally possible:

• – Within the framework of its own GTCS, the seller may stipulate price reductions (discount or rebate), corresponding to quantitative (e.g.: volume or value) or qualitative (e.g.: conditions of ordering or delivering), applicable to a particular buyer if he complies with the conditions;
• –  The special terms and conditions of sale (STCS) also allow the seller to adapt its GTCS from time to time to a single buyer and formalize the result of a negotiation between the parties (Article L. 441-1 II of the French Commercial Code);
• – Finally, the seller can define terms and conditions of sale per category (CTCS) applicable to all customers of a specific category of customers (see our article here).

Price differentiation with regard to pure players: key takeaways

Companies may be tempted to implement differentiated pricing practices between traditional players (“brick & mortar” and “click & mortar”) and specialized online sales players (“pure players”) within the framework of a management of distribution channels policy (or « channel management »). This price differentiation is, in principle, legal and is only likely to constitute a prohibited anti-competitive practice if it emanates from a company in a dominant position or from an agreement between undertakings and if:

• – the extent of the price differential can limit the competitive pressure of pure players; and
• – this differential is not based on any objective justification.

It is precisely for this reason that the Lego company recently made commitments before the AdlC (Link) to change its pricing policy. In fact, it came out from the preliminary investigation that there was a significant discount difference between operators selling exclusively online and other distributors, essentially linked to the fact that certain criteria for awarding the discount de facto excluded pure players. According to the AdlC, these practices could constitute a « discriminatory price differentiation » which could have anti-competitive effects by disadvantaging pure players and reducing the competitive pressure they could exert on the market.

Other points of attention for an omnichannel commercial policy

Other practices are likely to reduce the competitive pressure of e-commerce businesses. In its June 2020 study on this subject (Link ), the AdlC recalled that behaviors aimed at reducing competition from online sales could take several forms, pricing or non-pricing ones:

• – If simple price recommendations are legal, the maintenance of a resale minimum price is prohibited (indeed consumers do not take advantage of the opportunities of low prices and the competition that online sales could generate);
• – The setting of differentiated wholesale prices according to the resale channel constitutes a hardcore restriction (i.e. the price differentiation is no longer established according to the type of reseller, but targets in-store resales and online resales activities of a single distributor);
• – The prohibition of online sales constitutes a hardcore restriction;
• – The case law of courts and of the AdlC are more nuanced on the issue of bans of product listing on marketplaces. Prohibiting the listing of products on marketplaces may be lawful as long as it does not amount to prohibiting all sales on the Internet and is necessary to preserve one of the important characteristics of the products in question, which may be the case in a selective distribution network;
• – Any clause restricting the possibility for resellers to cooperate with online price comparison sites, not linked to quality requirements, could also be illegal even if the practice is still little developed on this subject.

With the rise of online sales and new players, the market has evolved considerably since the adoption of the European Vertical Block Exemption Regulation n° 330/2010 and the guidelines on vertical restraints. The European Commission has therefore undertaken to revise these rules by May 31, 2022 (the date on which the current rules will expire) and recently published, in September 2020, an assessment of its services (Link) which will serve as a basis for a possible evolution of the rules applicable to omnichannel commercial policies.

What Altaïr Avocats can do for you

• – Validation of pricing and sales policies by segment
• – Drafting the GTCS – GTU, STCS and CTCS for various sales channels, BtoB and BtoC
• – Coordination between off line and on line sales policies (phygital, website and marketplace)
• – Coordination between websites in accordance with the Geoblocking Regulation
• – Personal data collection and processing policy.