CMA issues £2.7m fine for restricting online prices

CMA issues £2.7m fine for restricting online prices

Published:

Author: Simon Barnes & Louisa Mottaz

Applies to: UK wide

CMA fines light fittings supplier £2.7 million for restricting online prices and sends out further warning letters to others in the industry.

The Competition and Markets Authority (CMA) has fined the National Lighting Company (NLC), a supplier of light fittings in the UK, £2.7 million for imposing minimum resale prices online. NLC prevented its resellers from selling its Endon and Saxby brands below a certain minimum price to consumers at the retail level. The infringing agreements were not committed to writing but were understood by the resellers to be a condition of the Internet License Agreement.

Online Sales

It is permissible for suppliers to recommend retail prices but resale price maintenance (RPM) practices where a supplier directly or indirectly prevents a reseller from independently determining its own retail price are illegal.

Although RPM is prohibited for both bricks and mortar and online sales, in recent years competition authorities throughout Europe such as the European Commission (Commission) and the CMA in the UK have been looking at online selling practices in greater detail.

Ann Pope the CMA Senior Director of Antitrust commented: 'The digital economy is booming and with so many businesses operating online it is vital that fair competition is maintained across all sectors. The CMA wants to ensure consumers get a fair price and a good deal.'

Online RPM is seen as particularly damaging because it prevents consumers from shopping around for the best deal. Previous fines for similar infringements have been equally substantial. In May 2016, a supplier of commercial refrigerators was fined £2.2 million and a bathroom fitting supplier was fined £780,000 for similar illegal online practices.

CMA Warning Letters

NLC's fine was increased by 25% because the company ignored a previous warning letter from the CMA relating to its online pricing.

Warning letters are not a formal allegation of wrong-doing but they can be sent if the CMA has reasonable grounds to suspect that the company engaged in anti-competitive behaviour.

Following this case, the CMA has also sent a number of warning letters to other suppliers in the light fittings industry who may be involved in similar anti-competitive conduct.

NLC's fine serves as a caution that warning letters should not be ignored. The CMA recommends that such letters should be taken seriously and that anyone who has received a warning letter should seek independent legal advice.

Avoiding RPM

There can be serious consequences for businesses that break competition law, including fines of up to 10% of a business's worldwide turnover so for any business that may be concerned about RPM, the CMA has also published additional guidance in the form of an open letter, a film and worked case studies to help explain the main issues involved and best practice to avoid breaching the law.

Disclaimer

This document is for informational purposes only and does not constitute legal advice. It is recommended that specific professional advice is sought before acting on any of the information given.