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News 16th Feb 2017

Competition Regulators Target Companies Restricting Resale Prices

Enforcing competition law against suppliers that fix or set minimum resale prices appears to be spearheading the recent enforcement practice of the Competition and Markets Authority (CMA).

In the course of 2016, this UK competition regulator sent a total of 63 ‘warning letters’ and 31 ‘advisory letters’, with the principal focus of each type of letter being this practice of restricting dealers’ ability to determine resale prices independently (‘resale price maintenance’ (RPM)).

These letters should be viewed in the context of the CMA’s recent ‘open letter’ to suppliers and retailers about RPM and competition law compliance. This open letter from June 2016 itself followed in the wake of two RPM fining decisions in the CMA’s bathroom fittings and commercial catering equipment investigations. The European Commission has also recently targeted RPM in its February 2017 consumer electronics investigation.

The CMA sends warning and advisory letters to companies it is concerned might be breaking competition law, but where a full formal investigation is not merited under the CMA’s ‘prioritisation principles’. Unlike advisory letters which only require written confirmation of receipt, a warning letter also requires a business to set out, in a written response to the CMA, what steps the company is taking to ensure it complies with competition law.

The CMA’s warning letters spread across sectors as diverse as cosmetics and toiletries, security systems, clothing, furniture, photographic equipment, heating products, personal accessories, bathroom fittings, commercial catering equipment, recreational and sports goods, estate agents and letting agents, medical equipment and private hire vehicle services.

Besides RPM, the CMA warned businesses that were coordinating their commercial conduct with their competitors or were refusing to supply other companies (which can be an ‘abuse of a dominant position’, if carried out by companies in a position of ‘dominance’).

The market sectors spanned by the CMA’s advisory letters included electronics accessories, leisure products, beverages, healthcare services, clothing, sports equipment, commercial catering equipment, bathroom fittings, footwear, electronic equipment, animal healthcare and medical equipment, utility systems and utilities.

In addition to RPM, the CMA advised companies about a wide range of potentially anti-competitive conduct, from coordinating prices with competitors, to sharing out markets, restricting sales territories, entering into exclusivity arrangements, charging excessive prices (another type of ‘abuse’ if engaged in by a ‘dominant’ company) and restrictions in relation to paid online search advertising.

Warning and advisory letters do not prevent the CMA commencing a formal investigation at a later stage and can also be issued in investigations that lead to fines being imposed.

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