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Heavy fine warns companies against fixing minimum prices charge by online sellers
A supplier has been fined fined £2.7 million for breaking competition law, having been found guilty of requiring retailers to use a minimum price when selling its products online. This kind of illegal practice, known as resale price maintenance, means customers miss out on the best possible prices and cannot shop around for a better deal on that supplier's products.
The National Lighting Company supplies light fittings to a range of retailers which then sell them on. After a detailed investigation, the Competition & Markets Authority found that it had imposed a minimum price on online sellers, which then had to retail goods at, or above, this price, and that it had tried to avoid detection by not committing agreements to writing.
The fine includes an extra penalty because the company ignored an earlier warning letter from the CMA (a warning letter may be sent when the CMA has reasonable grounds to suspect anti-competitive behaviour. It is not a formal allegation but must be taken seriously and requires a considered response).
To help stamp out resale price maintenance, the CMA has also reissued its advice to help businesses stay on the right side of the law. This includes an open letter on RPM, a film on RPM and case studies that explain how other businesses have ended up breaking the law.
"This decision should act as a warning to companies that resale price maintenance is illegal and that warning letters issued by the CMA are to be taken seriously and not to be ignored," warns Ann Pope, CMA senior director, Antitrust, says.
"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.
"That can only happen when retailers are free to set their own prices."
The Chapter I prohibition of the Competition Act 1998 covers anti-competitive agreements, concerted practices and decisions by associations of undertakings which have as their object or effect the prevention, restriction or distortion of competition within the UK or a part of it and which may affect trade within the UK or a part of it. Similarly, Article 101 of the Treaty on the Functioning of the European Union (TFEU) prohibits such anti-competitive agreements, concerted practices and decisions by associations of undertakings which may affect trade between EU member states.
The CMA has produced a series of animated videos explaining the main principles of competition law and how they affect small businesses.
Any business found to have infringed the Competition Act 1998 could be fined up to 10% of its annual worldwide group turnover. In calculating financial penalties, the CMA takes into account a number of factors including seriousness of the infringement(s), turnover in the relevant market and any mitigating and/or aggravating factors.
20th July 2017