LEGO France has agreed to adjust its pricing policy for resellers to avoid discriminating against online retailers.
The French competition authority (Autorité de la concurrence, or ADC) concluded in January that the LEGO Group’s pricing policy favours brick-and-mortar stores, offering incentives and discounts that online sellers are unable to access.
In 2013, LEGO France raised its prices for resellers by 15% across the board, but then offered a scale of rising discounts up to 13.044% to mitigate that increase. However, two online retailers – Cdiscount and EMC Distribution – complained to the ADC that this policy discriminated in favour of physical stores.
That’s because anywhere between 7-9% of those discounts were only accessible through qualitative means found exclusively in brick-and-mortar vendors, such as giving extra shelf space to LEGO sets – an impossible feat for online-only sellers.
The ADC launched an investigation, and concluded that this dual pricing policy ‘might constitute a discriminatory pricing likely to have anti-competitive effects, by disadvantaging the pure [online] players and reducing the competitive pressure they could exert’.
LEGO France responded by agreeing to make its discounts for resellers more transparent and accessible for a period of five years, coming up with a list of modifications to its pricing policy that have now been accepted and adopted by the ADC. The LEGO Group will also provide the ADC with an annual report on how its commitments have been implemented.
As US law firm K&L Gates has noted, though, the ADC’s decision technically doesn’t follow EU rules, which currently forbid dual pricing policies for hybrid firms that sell through multiple channels. Simply put: manufacturers can’t charge different prices for the same product to the same retailer depending on whether they sell it online or in-store.
Setting variable wholesale prices for purely online or physical stores, however, is ‘generally considered a normal part of the competitive process,’ according to a 2017 report by the European Commission. That doesn’t tally with the ADC’s conclusion over LEGO France, which applied the EU’s dual pricing rule to different prices for online-only sellers and physical stores or hybrid vendors.
The LEGO Group’s French arm has adjusted its pricing policy regardless. Should this case set a precedent, K&L Gates suggests it could have potentially negative ramifications for physical stores, which have larger overheads and separate costs to online-only retailers.
The law firm also points to a recent ruling in Germany, where the LEGO Group was fined for attempting to influence reseller prices by threatening to remove supply from retailers who deviated from its resale price lists – and offering conditional discounts for those who adhered to its suggested pricing.
According to K&L Gates, the ADC may therefore have suspected that LEGO France’s aims with its dual pricing policy were similar, insofar as controlling the prices at which its retail partners could sell its products – but there’s nothing in the ADC’s ruling to suggest that definitively.
With online retailers in France now seemingly able to access the same discounts as physical stores on merchandise, though, it’ll be interesting to see whether French fans find buying LEGO from third-party online-only vendors any cheaper in the months ahead.