All in a fix: UK regulator warns retailers over competition compliance on pricing
Following last month’s issue of a £160,000 fine to a retailer (Trod Limited – see Compliance Inform for October 2016) for resale price maintenance in the sports poster and merchandise industry, the UK Competition and Markets Authority has issued a stark reminder to businesses throughout the country about the importance of avoiding coordination of prices and pricing strategy.
The CMA published a press release on its website on 7 November 2016 to remind sellers about the illegality of discussing and agreeing the levels of retail prices with competitors and distributors, and confirmed that it is writing to a number of online businesses to remind them of their obligations and seek to dissuade them from behaviour which “may be denying customers the best available deals”. It specifically highlighted the agreement between Trod and GB Eye Limited (reported by the latter in exchange for immunity from financial penalties) not to undercut one another’s sale prices and points readers both to the summary of this case, as an exemplary study in how not to act in relation to prices, and also to a one page ‘at-a-glance’ guide also published by the CMA on 7 November, which reminds sellers of the consequences of infringement, notably:
- for companies, penalties of up to 10% of group turnover
- for individual officers, director disqualification orders and, where direct involvement is shown, up to five years’ imprisonment on conviction.
In addition, the CMA’s guide includes a list of ‘Dos’ and ‘Don’ts’ to which sellers must take care to adhere:
- “Don’t agree with competitors that you won’t undercut each other, or what prices you will each sell your products for
- Don’t discuss your pricing strategies with competitors;
- Do familiarise yourself and your staff with the law. The CMA has a range of short and simple guides to help;
- Do seek independent legal advice to ensure you comply with the law.”
We would echo this message and emphasise the importance of all four of these points – notably, do not hesitate to contact the EU & Competition team here at Charles Russell Speechlys if ever you are unsure whether a policy or practice your commercial and marketing teams may be following, or dealings with any competitor or distributor in relation to pricing (and, indeed, other issues, such as relating to customer groups and territorial protection), is compliant with the competition rules.
The predominance of online retailing has been a particular focus of the CMA’s attention in regards to pricing, with Stephen Blake, Senior Director of the CMA’s Cartels and Criminal Group emphasising that:
“Online markets are hugely valuable tool for consumers to shop around and find the best value products, making the most of effective competition. But these benefits for shoppers are at risk if the suppliers seek to restrict competition between them…
… entering into agreements that limit price competition cheats consumers, is illegal and can have serious consequences for the companies and individuals involved… sellers should make sure they have read our advice so they don’t get caught out”.
To sharpen the warning issued by the CMA, on 1 November 2016 its civil cartels unit announced that it was pursuing an investigation into anti-competitive arrangements which its initial information gathering and disclosure requests of the parties have suggested may have been entered into within the market for the supply of products to the furniture industry (see CMA press release here.)
“The Trod case has also illustrated the particular dangers and difficulties of the adoption of digital devices by businesses. In this case, it was automated re-pricing software which was the tool for price coordination. Speaking about this case, Director of Enforcement of the Competition and Markets Authority, Michael Grenfell remarked as follows:
“There was clear agreement between the parties to facilitate price coordination, with communications between them that they aimed not to undercut each other’s prices. But there may be cases in which, as Professor Ariel Ezrachi of Oxford University has pointed out, computing devices automatically and autonomously collude – because they ‘determine independently the means to optimise profit’, ie independently of their human programmers – and this can raise questions about key concepts relevant to the antitrust notion of an ‘agreement’ or a ‘concerted practice’, such as intentionality or a ‘meeting of minds’ or knowledge.”
Regulators will have their work cut out in the future differentiating between “innocent” automated re-pricing and instances where human operators have knowingly used computer programs as a means of unlawful collusion. Furthermore, as Mr Grenfell notes, there is a troublesome third category of case where computers themselves – absent any human intervention – elect to coordinate prices. We can confidently predict that regulators will have their work cut out in monitoring the fast moving developments in technology driven markets – and struggling to ensure the law keeps pace!
For further information, please contact Rory Ashmore on +44 (0)20 7427 1031 or email@example.com