UK and EU competition law provides that retailers must be free to determine their own resale prices. Actions by suppliers to restrict this freedom by dictating a fixed or minimum resale price are prohibited.
The UK regulator, the Competition and Markets Authority (CMA) has vigorously enforced the law in this area, regularly pursuing investigations into and ultimately imposing fines on suppliers who engage in resale price maintenance.
Resale price maintenance (RPM) technically involves an anti-competitive agreement between two parties being the supplier and retailer concerned. The CMA has always had the ability to enforce competition law against both the supplier and retailer party to an RPM infringement, however it has discretion to decide not to enforce the law against any particular party.
Historically this has usually meant that the CMA has pursued supplier parties and not retailer parties to RPM infringements - although the author of this article represented the supplier party in the Sports Bras RPM case, (which was ultimately dropped on the basis that there were no grounds for action and the CMA was pursuing the retailers in that case).
In many cases, retailer parties may be perceived as a “passive” participant in such infringements and the CMA has perhaps seen the benefit in keeping retailer parties as a co-operative ally and good source for gathering evidence against the supplier party, choosing not to enforce the law against them to maintain this dynamic.
However, the CMA has now issued its first fine against a retailer in an RPM case. A retailer of musical instruments, GAK admitted to entering into an RPM agreement with Yamaha whereby GAK would not discount the online price of various Yamaha musical instruments below a minimum price and agreed with the CMA to settle the case in exchange for a reduced fine of over £250,000. The CMA may have been motivated to pursue enforcement action against the retailer in this case because Yamaha applied for leniency in relation to the infringement, bringing the conduct to the attention of the CMA and also because GAK had continued to engage in the infringing conduct following receipt of a warning letter from the CMA.
This is one recent example in a series of recent cases involving RPM infringements relating to the supply of musical instruments and the prevalence of RPM activity in the sector has motivated the CMA to create its own in-house price monitoring tool to deter businesses from engaging in agreements that restrict online retail prices. The CMA has explicitly stated that it will also use the software to monitor suspicious pricing activity in other sectors, helping it to detect RPM activity without the need for a leniency applicant.
What this means for suppliers and retailers who may have engaged in RPM
The case confirms that the CMA can enforce the law against retailer parties to RPM agreements and that immunity can be secured by supplier parties to RPM agreements through the CMA leniency programme.
Retailer parties can also apply for immunity through the CMA leniency programme, of course and the awareness this case will generate amongst suppliers who are guilty of RPM infringements increases the risk for retailers of being subject to a Competition Act investigation relating to RPM in which they have participated.
Separately, the CMA’s new price monitoring software will increase the risk of the CMA gathering its own intelligence into RPM practices, and so the risk of the CMA launching an RPM investigation without the need for a leniency applicant is increased.
Suppliers and retailers alike who have engaged in RPM should therefore each consider submitting a leniency application to the CMA to secure immunity from financial penalty and personal sanctions before they are beaten to the post by the other relevant party.