Lego amends its price discounts system with regards to online sales

Cet article est disponible en français.

In a decision dated 27 January 2021 (n°21-D-02), the French Competition Authority ("FCA") accepts the commitments proposed by Lego to amend its price discounts system.  Hence, it provided an example of what can be done in term of admissible price differentiation between brick-and-mortar and online resellers.

Background of the case

It took six years for this decision to be published.  In 2015, EMC and Cdiscount formed a complaint before the FCA on practices implemented in the construction games sector by Lego.  The famous manufacturer implemented in 2014 a 15% price increase and a price discount policy of up to 13%. The plaintiffs argued that this policy discriminates against pure players, who were de facto not able to meet the criteria for a high discount rate.

The price discount system evolved following a decision of the German competition authority and contained new criteria about online activities.  EMC and Cdiscount kept arguing that the new policy was still discriminating between online resellers and other resellers.

Considering the competition concerns the FCA had, Lego has submitted several commitments which were filed, tested, and partially made binding.

In its decision, the FCA reminds that price differentiation between these two types of actors is possible, but that it can constitute an anticompetitive practice if (i) it involves anticompetitive effects by limiting the pressure that actors specialised in online sales should be able to exercise on traditional commerce and if (ii) there is no objective justification to that conduct (see also FCA, avis n°12-A-20 dated 18 September 2012, para. 253).

A practical example of the definition of a non-discrimination price discounts system

While we can regret the absence of an infringement procedure and the use of a commitments procedure for the clarity of the decisional practice, the FCA's decision retains an important practical interest.  The FCA examines the lawfulness of a price discounts system on a case-by-case basis, here criterion by criterion, and stresses the importance of maintaining a discounts system that is proportionate to the objectives pursued and accessible to all types of distributors, regardless of the sales channel used and the size of the distributor.

In particular:

• A supplier can make the granting of a discount conditional to the creation of a non-commercial website (in a way institutional) in a very specific context.

  Online retailers were required to set up a non-commercial site dedicated to the Lego brand.  The award of points necessary to obtain a high discount was assessed in proportion to the number of children who clicked on the link on the retailer's commercial site redirecting them to the above-mentioned non-commercial site.  This criterion was considered excessively difficult to meet by FCA's investigation services.  Lego, however, refused to use alternative solutions (such as the creation of a dedicated space on a commercial site) but offered to increase the distributor's freedom to manage its non-commercial website and to reduce the thresholds for obtaining the discount.

  The FCA points out that a criterion requiring a non-commercial site has never been seen before, but accepts the commitment proposed by Lego in view of the very specific context of the games and toys distribution sector due to the lack of a realistic alternative that allows children to become acquainted with its toys while safeguarding their safety.  The FCA also notes that since the Covid-19 crisis, distributors have been developing their presence in various forms and do not limit their presence to an online commercial website.

• The granting of a discount may be subject to compliance with delivery conditions, but the implementation of this criterion must take into account the variety of distributors' delivery strategies.

  In order to obtain additional points, Lego required distributors to deliver products to the customers' home on the day of purchase in predetermined geographical areas.  The application of this criterion did not take into account the diversity of delivery strategies of online resellers.  The FCA accepts the changes proposed by Lego which are aimed to take better account of the diversity of delivery strategies (which include home delivery on the day of purchase in the distributors' "natural" catchment area, delivery to delivery points, delivery at consignment points as well as in-store collection called "click and collect").

• A price discounts criterion should not per se exclude online activities.

  One of the sub-criteria, which was related to the representation of the Lego brand with a basic "buyer experience", was worded in such a way that it could only be met by brick-and-mortar reseller.  In its commitments, Lego has modified the wording of this criterion to add the possibility of meeting this criterion with online activities.

The commitments will enter into force on 2 March 2021 for a duration of five years.