CMA Fines Suppliers for Restricting Online Discounts
30 June 2016
The Competition and Markets Authority (CMA) has recently imposed fines on two suppliers for engaging in resale price maintenance (RPM) contrary to EU and UK competition law.
RPM occurs when a supplier restricts a retailer’s ability to set the prices at which it will resell the supplier’s products, for example by requiring the retailer to sell at a particular price or above a minimum price.
The first fine was announced on 10 May 2016, when the CMA confirmed that it had issued a decision that the bathroom fitting supplier Ultra Finishing Ltd (Ultra) broke competition law by preventing retailers from discounting online prices.
Ultra had engaged in RPM between 2012 and 2014 by providing retailers with online trading guidelines which included a recommendation that online prices should not be greater than 25% below what the recommended retail price was for products in bricks and mortar stores. Whilst Ultra called these guidelines “recommendations”, the reality was that Ultra threatened retailers with penalties for not following them, such as charging retailers higher prices for the products if they failed to comply with the recommendations. The CMA concluded that the recommendations therefore amounted to a limit on the retailer’s ability to set the prices at which it would offer the products to potential buyers and constituted RPM. Ultra admitted to breaching competition law and agreed to pay a fine of £768,668.
The second fine was announced on 24 May 2016, when the CMA confirmed that it had issued a decision that the fridge supplier ITW Ltd (ITW) breached competition law by restricting dealers from offering online discounts. ITW were found to have engaged in RPM by operating a minimum advertised price policy between 2012 and 2014. ITW threated to charge dealers higher cost prices for the products in question or even stop supplying them altogether if they advertised below the minimum price. The CMA again held that ITW’s minimum advertised price policy constituted RPM because it prevented the dealers from deciding the resale price for those goods. ITW admitted that it had engaged in RPM and paid a fine of £2,298,820.
Both of these decisions demonstrate the CMA’s current commitment to identifying, and punishing, any businesses which are engaged in RPM, particularly in relation to online sales. Businesses should therefore be extremely cautious in relation to any agreements which restrict the ability of the retailer to set its own prices.
We would strongly advise companies to be aware of their obligations under competition law and to be proactive in ensuring that adequate policies are in place to ensure that there are no breaches of competition law.