Setting Online Minimum Prices - Risks Heavy Fines

In May 2016 the Competition & Markets Authority ("CMA") imposed substantial fines on suppliers in the bathroom fittings and commercial catering equipment sectors for engaging in online resale price maintenance with some of their retailers for specifying the minimum prices that the retailers could advertise for sales of the suppliers' products over the internet.

On the 21 June 2016 the CMA published an open guidance letter to retailers and suppliers on restrictions on retail pricing and compliance with competition law.

It is foreseeable that other cases like these may follow in the retail sector (not just in these particular markets) given the CMA's current focus and attention. Now is the time to review your position and compliance program.

The key messages to suppliers are:

• You must not dictate the price at which your products are sold, either online or through other sales channels. 
• Policies that set a minimum advertised price for online sales can equate to resale price maintenance and are usually illegal. 
• You must not use threats, financial incentives or take any other action, such as withholding supply or offering less favourable terms, to make retailers stick to recommended resale prices.

The key messages to retailers are:

• You are normally entitled to set the price of the products you sell, whether online or through other sales channels.
• Suppliers are not usually allowed to dictate the prices at which you advertise their products online.
• If you have agreed to sell at fixed or minimum prices with your supplier, you may both be found to be breaking competition law.

There can be serious consequences for businesses that break competition law, including fines of up to 10% of a business’s worldwide turnover. There are some very exceptional circumstances in which it may not be unlawful to specify retail prices but you should seek legal advice on this point if you think it applies to your business.

The 3-page letter includes case studies and links to further information, including a 60-second guide and video. Click here to view the letter.

In May 2016, the CMA imposed a fine of over £2 million on the supplier in the commercial catering case, and over £780,000 on the manufacturer in the bathrooms case.

The suppliers’ fines were each reduced by 5 to 10% for setting up a comprehensive competition law compliance programme that included staff training. Each supplier also benefited from a 20% fine reduction because it admitted breaking the law and fully co-operated with the CMA under a settlement agreement.

If you are a supplier or retailer of products that can be bought online Ashfords can advise you on an effective compliance program and on dealing with illegal anti-competitive practices in your supply chain.