Resale price maintenance case studies
Lessons from the Competition and Markets Authority바카라 사이트檚 (CMA) resale price maintenance cases.
Background
In 2017 the CMA fined a supplier of domestic light fittings 拢2.7 million for breaking competition law by restricting resellers바카라 사이트� freedom to set their own prices online 바카라 사이트� a form of resale price maintenance (RPM). The CMA was made aware of this by complaints from resellers.
This latest case follows similar cases in 2016 where the CMA found that 2 businesses, one supplying commercial catering equipment and the other supplying bathroom fittings, similarly broke competition law by engaging in RPM 바카라 사이트� dictating the minimum prices at which resellers sold their products online.
RPM is where a supplier and a retailer agree that the retailer will not resell the supplier바카라 사이트檚 products below a particular price. RPM can also be achieved indirectly, for example as a result of restrictions on discounting or where there are threats or financial incentives to sell at a particular price. You can find out more about RPM by watching our .
Domestic light fittings RPM case 바카라 사이트� what happened?
A supplier of domestic light fittings broke competition law by dictating the minimum prices at which its resellers could sell its products online. The supplier set a maximum discount off the recommended resale price (RRP) that resellers were allowed to offer.
Hiding illegal online pricing policies
The supplier was aware of the legal risks of what it was asking resellers to do 바카라 사이트� it sought to hide the practice of RPM behind Internet Licence Agreements (ILAs). It also avoided communicating pricing instructions and policies via email or in writing. However this didn바카라 사이트檛 stop the CMA from investigating and concluding that there had been a breach of competition law. For example, in a recording of a meeting between the supplier and a reseller, the reseller asked:
바카라 사이트淚sn바카라 사이트檛 it illegal to fix prices?바카라 사이트�
The supplier replied: 바카라 사이트淚t is illegal to fix prices. That바카라 사이트檚 why we won바카라 사이트檛 put anything in writing.바카라 사이트�
In addition, a witness told the CMA:
The pricing policy was communicated to resellers at the time of signing or renewing the ILA. Although the [바카라 사이트 pricing policy was not included in the ILA for obvious legal reasons, resellers signing the ILA understood that the [바카라 사이트 pricing policy was a condition of the ILA. The ILAs acted as a veil.
On some occasions, restrictive pricing policies were discussed and agreed at industry events and trade shows.
Enforcement of online pricing policies
The supplier threatened to suspend the accounts of non-compliant resellers or take away image rights under the ILAs, to force the resellers to price at or above a specified price online. For example, a witness told the CMA:
I would give these companies 24 hours to increase their prices. If after 24 hours the price had not increased, their account would be put on 바카라 사이트榮top바카라 사이트�. I recall that a significant number of accounts were put on stop.
What CMA action was taken?
The supplier was fined 拢2.7 million which included a 25% uplift because it had ignored a previous warning letter sent by the Office of Fair Trading (the CMA바카라 사이트檚 predecessor).
Commercial catering equipment and bathroom fittings RPM cases 바카라 사이트� What happened?
In May 2016, the CMA fined a supplier of commercial refrigeration equipment over 拢2 million and a bathroom fittings manufacturer over 拢780,000 for breaking competition law.
In the commercial catering equipment case, the supplier imposed a 바카라 사이트榤inimum advertised price바카라 사이트� (MAP) policy that restricted the price at which retailers could advertise the supplier바카라 사이트檚 product online. It enforced this MAP policy by threatening to charge dealers higher cost prices for products, or stopping supply altogether, if they advertised below the minimum price. For example, an email from the supplier read:
Whilst researching online pricing I can see a number of products which are listed below the minimum advertised price바카라 사이트�
Unfortunately by not adhering to the policy and attached minimum advertised pricing we shall no longer be able to process any order received at standard discount terms.
In the bathroom fittings case, the manufacturer threatened retailers with penalties for not pricing at or above a 바카라 사이트榬ecommended바카라 사이트� online price as set out in 바카라 사이트榦nline trading guidelines바카라 사이트�. Enforcement threats included charging retailers higher prices for products, withdrawing rights to use the supplier바카라 사이트檚 images online or withholding supply of products. For example, an email from the manufacturer read:
[바카라 사이트 our online trading guidelines have come into effect today and it has been reported that your site is not compliant with them바카라 사이트f we can바카라 사이트檛 bring your site in line by close of business on 2/2/12 we will have to put your account on 바카라 사이트榮top바카라 사이트�.
We [바카라 사이트 would appreciate it if someone contacts [바카라 사이트楳arketing Executive바카라 사이트橾바카라 사이트o give him some assurances that you will have correct pricing by tomorrow evening.
How did these businesses break the law?
The CMA found that preventing retailers from advertising or selling products online below a certain price restricted their freedom to set the price for online sales and, therefore, amounted to illegal RPM in relation to online sales.
What are the lessons from these cases?
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Suppliers must not take any action that interferes with a retailer바카라 사이트檚 ability to set their own price of the supplier바카라 사이트檚 goods online or through other channels. Any attempt to do so is likely to be illegal.
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The principles of competition law apply to all sectors, including online retail 바카라 사이트� the CMA is keeping an active watch on potential RPM agreements in the online space and is prepared to take action against firms breaking the law.
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You cannot disguise RPM policies. Any agreement, be it verbal or in writing, is equally liable to CMA investigation and enforcement. You can바카라 사이트檛 get around the law by taking agreements 바카라 사이트榦ffline바카라 사이트�.
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You cannot try to use apparently legitimate policies (for example, image licensing) to conceal RPM practices.
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If you receive a CMA warning letter it is very important that you take it seriously 바카라 사이트� in a future investigation, your failure to take action may be seen as an aggravating factor and could lead to an uplift in any fine.
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The consequences of breaking competition law can be severe: fines can be as much as 10% of a business바카라 사이트檚 global turnover.
What you can do
These cases show that it바카라 사이트檚 important for suppliers and retailers to review their practices around discounting and pricing policies so they don바카라 사이트檛 risk entering into illegal agreements. Some of the ways to do this are to:
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Create a culture of compliance 바카라 사이트� everyone in your business must understand what they need to do to stay on the right side of competition law.
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Read our 60-second summary on RPM and our open letter to suppliers and retailers 바카라 사이트� both give pointers to help businesses avoid falling foul of the law.
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If you have information on other companies in your industry that may have been involved in an anti-competitive arrangement, report it to us or call us on 020 3738 6000.
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If you think your business has been involved in RPM, you should notify the CMA as soon as possible 바카라 사이트� you may benefit from lenient treatment by being the first to come forward to the CMA.
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We also recommend that you seek independent, legal advice.
For more information on how businesses can comply with competition law, see our guidance on competing fairly in business which includes a series of short films and at-a-glance guides on different aspects of competition law.
Updates to this page
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New light fittings RPM case study added.
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First published.