In the run up to the busiest retail trading months of the year, the CMA has published a flyer for online sellers on how to avoid infringing competition law. The CMA is committed to tackling such anti-competitive behaviour, which it says jeopardises online markets and consumer trust in e-commerce. It warns of the serious consequences for businesses that infringe competition law, including fines of up to 10% of a business’s worldwide turnover. Individuals that are involved in an illegal cartel can also face personal fines, be banned from running a company and can even go to jail.
Set your prices independently and do not agree with your competitors not to undercut one another
In August, Trod Limited, a small Birmingham based company was fined for agreeing with one of its competing online sellers, GB eye Limited (trading as ‘GB Posters’) not to undercut each other’s prices for posters and frames sold via Amazon’s UK Marketplace website (except where another seller via Amazon was cheaper) – businesses use Marketplace to sell directly to consumers. The agreement was implemented by using automated repricing software which the parties each configured to give effect to the agreement not to undercut one another. To settle the case (with a 20% discount for its admission and cooperation), Trod agreed to pay a fine of £163,371 for taking part in the cartel.
The CMA noted that while online pricing tools, such as automated repricing software, can assist sellers to compete and benefit consumers, in this case, the parties used the repricing software to implement an illegal agreement to deny consumers these benefits. The CMA also noted that software providers could also be at risk of breaking competition law if they help their clients use software to facilitate anticompetitive practices. In this case, neither Amazon nor the software providers were implicated in any of the infringements.
The CMA also sends the message that competition law applies to small businesses as well as large ones. The two online sellers in this case were small businesses, each with annual turnovers of under £16 million.
Tackling resale price maintenance (RPM) has already featured in the CMA's enforcement of competition law this year. RPM is where a supplier and a retailer agree that the retailer will not resell the supplier’s products below a particular price. RPM can also be achieved indirectly, for example as a result of restrictions on discounting or where there are threats or financial incentives to sell at a particular price.
Earlier this year, the CMA fined a supplier of commercial refrigeration equipment over £2 million and a bathroom fittings manufacturer over £780,000 for breaking competition law. In the commercial catering equipment case, the supplier had imposed a ‘minimum advertised price’ (MAP) policy that restricted the price at which retailers could advertise the supplier’s product online. It enforced this MAP policy by threatening to charge dealers higher cost prices for products, or stopping supply altogether, if they advertised below the minimum price. In the bathroom fittings case, the manufacturer threatened retailers with penalties for not pricing at or above a ‘recommended’ online price as set out in ‘online trading guidelines’. Enforcement threats here included charging retailers higher prices for products, withdrawing rights to use the supplier’s images online or withholding supply of products.