Out-Law News 2 min. read
28 Apr 2016, 10:26 am
Although companies are entitled to 'recommend' retail prices for online sales, the CMA described Ultra's threats as examples of illegal resale price maintenance (RPM). The company threatened to charge resellers higher prices for its products, withdraw their rights to use its images online or even cease supply altogether if they did not charge at least the recommended price, effectively limiting their ability to offer discounts to potential buyers, the regulator said.
Ultra has admitted to RPM in relation to internet sales between 2012 and 2014. The penalty includes a 20% settlement discount, according to the CMA's announcement. RPM is a form of 'vertical' price-fixing involving parties at different levels of the supply chain, as opposed to price-fixing involving direct competitors.
Vertical price-fixing affecting e-commerce is a particular issue for competition authorities, as the "ease of searching on the internet" means that price competition from online sales is "usually intense", said Ann Pope, the CMA's senior director responsible for the case.
"While the CMA, like most other competition authorities, regards anti-competitive agreements between competitors as particularly serious, this decision serves as a reminder that so-called 'vertical' restrictions between supplier and distributor also remain on its radar, particularly with regard to vertical price-fixing," said competition law expert Robert Eriksson of Pinsent Masons, the law firm behind Out-Law.com.
"Just like the European Commission in the past, the CMA is stressing the benefits of e-commerce and the importance of price competition through online sales. Any attempts to stop retailers from discounting online will therefore clearly be regarded as serious breaches - such as in this case where the supplier tried to force retailers to adhere to a 'recommended' retail price, effectively turning it into a minimum resale price," he said.
The CMA will issue a formal infringement decision in the case shortly, it said. It has also received complaints of "potentially similar conduct" by other UK bathroom fitting suppliers; and although it has not yet made a decision on whether to formally investigate those complaints it said that it expected "businesses involved in similar practices to bring them to an end as soon as possible".
Competition law expert Richard Snape of Pinsent Masons said that the "large majority" of the 85 'warning letters' sent by the CMA to companies over the course of 2015 involved RPM and other restrictions on online sales.
"Warning letters are sent by the CMA where it has concerns with a company's practices, but does not intend to follow up with a formal investigation – at least for the time being," he said. "The prevalence of warning letters relating to these issues highlights that they remain key areas of concern and, as highlighted by the Ultra Finishing case, where the CMA establishes that a serious breach has occurred it may go one step further and take action against the company," he said.