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Online retailer hit with six-figure fine for participation in online cartel

An online poster and picture frame seller has been handed a six-figure fine by the UK's main competition authority over its participation in a cartel.16 Aug 2016

The Competition and Markets Authority (CMA) fined Birmingham-based Trod, trading as Buy 4 Less, Buy For Less and Buy-For-Less-Online, £163,371 for breaching UK competition laws that prohibit agreements, practices and conduct that have as their object or effect the prevention, restriction or distortion of competition and which may affect trade within the UK.

The CMA's investigation found that Trod had agreed with another UK business, GB Posters, that they would "not undercut each other’s prices for posters and frames sold on Amazon’s UK website" for a period of more than four years. GB Posters did not receive a fine for its participation in the cartel as it had reported the wrongdoing to the CMA and received immunity under the CMA's leniency programme. Trod also benefited from a reduction of 20% in its fine under the CMA's settlement programme after it admitted to the breach and cooperated with the regulator's investigation.

The CMA said last month that Trod and GB Posters had engaged in cartel activity "by using automated repricing software which the parties each configured".

At the time, Stephen Blake, senior director and head of the CMA’s cartels and criminal group, said: "Online marketplaces such as Amazon allow sellers to sell their goods directly to consumers, who often benefit from more choice and lower prices as a result. Online pricing tools, such as automated repricing software, can also help sellers compete better, for the benefit of consumers. In this case, however, the parties used repricing software to implement an illegal agreement to deny consumers these benefits."

"Sellers on online platforms need to be aware that agreeing with each other to limit price competition in this way is illegal and can have serious consequences for the companies and individuals involved. The CMA is committed to tackling such anti-competitive behaviour, which jeopardises online markets and consumer trust in e-commerce," he said.

Competition law expert Tim Riisager of Pinsent Masons, the law firm behind Out-Law.com, said: "This decision is a further example of the CMA actively enforcing the competition law rules in online marketplaces. The use of algorithms to implement a cartel is a novel basis for a decision in the UK and the CMA will need to consider how best to approach detection of these cases. In this instance, the infringement was only discovered after GB Posters 'blew the whistle'. Trod has also been indicted and pleaded guilty in the US for the same activity, highlighting how the enforcement of online cartels can cross jurisdictional boundaries."

"This case also clearly indicates the CMA's willingness to pursue investigations into small companies as well as major multinationals. The CMA's own research revealed that awareness of competition law amongst SMEs in the UK needs to be improved and this decision should serve as a warning to all companies to educate their employees on what is and is not permissible," he said.