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CMA continues with enforcement crackdown on restrictions on online selling


Two recent announcements by the UK's competition watchdog send a strong message about its determination to continue with its enforcement focus on companies attempting to restrict online sales of consumer goods, an expert has said.

TGA Mobility Scooters, which is currently under investigation by the Competition and Markets Authority (CMA), now risks a fine of up to 10% of worldwide turnover for future breaches of competition law after the watchdog announced its decision to withdraw immunity from fines. Separately, the CMA confirmed a £1.45 million fine for Ping Europe, the golf club manufacturer, for banning UK retailers from selling its golf clubs online.

Ann Pope, the CMA's senior director for antitrust enforcement, said that the internet was "an increasingly important distribution channel".

"Retailers' ability to sell online, and reach as wide a customer base as possible, should not be unduly restricted," she said. "The fine the CMA has imposed on Ping should act as a warning to companies that preventing their products from being sold online could be illegal."

"Businesses of all sizes need to take competition law seriously. We will withdraw immunity from small businesses, exposing them to the risk of fines, if we think it is necessary - particularly where previous warnings have been ignored," she said.

UK and EU competition laws place a general prohibition on agreements between businesses that have as their object or effect the prevention, restriction or distortion of competition. Companies can be fined up to 10% of their annual global turnover if they are found to have infringed these rules.

The CMA is increasingly targeting so-called resale price maintenance (RPM) and other forms of 'vertical' price fixing, where parties at different levels of the supply chain agree that a retailer will sell a product at or above a minimum price level set by the supplier. Suppliers are also prohibited from imposing complete bans on selling online and cannot discourage or punish retailers for doing so, for example by charging higher wholesale prices for goods sold online or threatening to withhold supplies or rebates.

Ping had attempted to argue that it was justified in preventing retailers from selling online because its products are designed to be custom fit to customers in-store. While the CMA agreed that this was a "genuine commercial aim", the company could have achieved this through less restrictive means.

The CMA has ordered Ping to end its online sales ban, which currently applies to two retailers. It is also prevented from imposing the same or equivalent terms on other retailers in future.

"This fine shows that the CMA is serious about cracking down on online sales restrictions so that consumers can get the benefit of the intense price competition that online selling creates," said Alan Davis, competition law expert at Pinsent Masons, the law firm behind Out-Law.com. "It is the latest in a line of cases where significant penalties have been imposed not just in the UK but also in Germany and other European countries."

"Suppliers often feel that they need to try and control the prices charged or advertised online by retailers. However, the competition rules are clear that a supplier can't impose a complete ban on selling online and can't discourage or punish the retailer for doing so. There are only quite limited ways in which selling online can be restricted, for example, it may be permissible in certain circumstances to prohibit sales via third party platforms such as Amazon and eBay," he said.

TGA Mobility Scooters was one of a number of suppliers of similar products which received a formal warning from the CMA's predecessor, the Office of Fair Trading (OFT), in 2013, against restricting their retailers from advertising prices online. The CMA is currently investigating agreements that TGA entered into with three different retailers, which either prevented the retailers from advertising the prices of their products online or from advertising them below specified minimum prices.

Companies that enter into agreements with other companies are immune from fines under UK competition law where their combined turnover is no more than £20m. The CMA is, however, entitled to withdraw this immunity if it considers that an agreement is likely to breach competition law.

The CMA's decision to withdraw TGA's immunity from fines is the first time it has done so at an early stage in its investigation, it said. TGA has now taken action to bring any online price advertising restrictions concerning its products to an end, and has begun a "wide-ranging" internal competition compliance and training programme.

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