Fine shows companies must promote competition law compliance within the workforce, says expert

On Tuesday the UK's Competition and Markets Authority (CMA) announced that it had imposed a fine of £2,298,820 on ITW Ltd for a breach of competition rules. The regulator took issue with resale price maintenance (RPM) the company had engaged in in internet sales and subsequently admitted to.

The CMA said ITW, through its Foster Refrigerator division, had employed a ‘minimum advertised price’ policy that restricted the price that its goods could be advertised for online by distributors. The company threatened to charge its dealers "higher cost prices for Foster products" or to stop supplying the products altogether if the distributors advertised the fridges below the minimum price.

The CMA said that ITW's actions amounted to a breach of the UK's Competition Act. The fine served on ITW was discounted by 10% after the company agreed to set up a "comprehensive programme to train its staff in compliance with competition law". A further 20% reduction on the level of fine was also applied to account for "savings due to ITW’s admission and co-operation with the CMA under a settlement agreement", the authority said.

"RPM is illegal because it stops dealers setting their prices independently to attract more customers," the CMA said. "Whilst the CMA has decided only to impose a penalty on the supplier in this case, dealers should be aware that they can also be fined for entering into RPM agreements with suppliers."

Competition law specialist Caroline Janssens of Pinsent Masons, the law firm behind Out-Law.com, said: "This case shows once again that so-called 'vertical' restrictions between suppliers and distributors, particularly those involving vertical price-fixing in relation to online sales, remain a key area of concern for the CMA and remain very high on its radar."

"This case also emphasises the importance for businesses to invest time and resources in promoting an understanding of competition law among their employees. One way of doing this is to devise and actively implement a robust and tailored competition compliance policy. Not only a compliance policy that minimises the risk of breach in the first place, but if the company is investigated for anti-competitive behaviour, evidence of a compliance policy may be taken into account by the CMA and can lead to a reduction in fine," she said.

In its statement the CMA also said that it had sent "warning letters" to 20 other companies operating in the commercial catering equipment sector. The regulator believes those companies might have engaged" in similar internet sales practices" to those ITW had deployed, it said.

"The warning letters have been sent to suppliers of commercial catering equipment that may have implemented minimum advertising price polices and also to dealers that may have agreed to apply the policies imposed by their suppliers," the CMA said. "A warning letter does not itself mean that a company has been found to have broken competition law. However, if necessary, the CMA will also take further enforcement action against companies which participate in RPM."

Ann Pope, senior director at the CMA, said that the regulator "takes vertical price-fixing seriously" and is "focused on tackling anti-competitive practices that diminish the many benefits of e-commerce across all sectors".

The CMA recently fined a bathroom fitting company for engaging in RPM.