Competition Alert: Casio fined £3.7m for preventing price discounts
The Competition and Markets Authority continues enforcement of competition law against suppliers and manufacturers of branded goods, imposing its biggest ever fine for resale price maintenance.
On 1 August 2019, the Competition and Markets Authority (the CMA) issued an infringement decision finding that Casio Electronics Co. Ltd (Casio) had infringed the prohibition on anti-competitive agreements under both UK and EU competition law by restricting retailers from setting their own online resale prices. The CMA imposed a record fine of £3.7 million on Casio, which is indicative of its increased enforcement appetite towards manufacturers who seek to restrict resellers’ freedom to set their own prices online.
After a 1.5 year long investigation, the CMA announced this month that between 2013 and 2018, Casio had set out to restrict the freedom of its retailers to set prices online. The CMA found that Casio had implemented a policy designed to require retailers to sell digital pianos and keyboards at or above a minimum price. It then monitored their activity and pressured retailers to modify or raise their prices when they fell below the specified minimum price. This practice, known as resale price maintenance (RPM), is generally illegal under UK and EU competition law as it often means that customers miss out on the best possible prices.
In an effort to ensure complete compliance with its pricing policy, Casio used new software to make it easier to monitor the prices set by retailers in real time. The policy was also enforced by retailers alerting Casio of non-compliant resellers. This practice meant that individual retailers had little incentive to offer online discounts on their products for fear of being sanctioned.
What is RPM?
RPM involves setting a minimum resale price (e.g. where a supplier and a retailer agree that the retailer will not resell the supplier’s products below a specified price) or a fixed resale price (that a reseller has to sell at). 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.
Casio has now admitted to pursuing RPM and recently reached a settlement with the CMA. The CMA imposed a fine of around £3.7 million which includes a 20% discount for Casio’s willingness to cooperate and its admission of guilt. This is the largest fine imposed by the CMA to date for acts of RPM and it is an indication of the CMA’s seriousness in seeking to combat the practice.
Increased enforcement against RPM
In recent years, both the European Commission (the Commission) and the CMA have been very active in investigating RPM and have together issued several RPM infringement decisions. In July 2018, the Commission fined four electronics companies – Philips, Pioneer, Asus and Denon – for restricting the ability of online retailers to set their own retail prices. In 2016 and 2017, the CMA fined three suppliers in separate sectors (light fittings, bathroom fittings and commercial refrigeration) for the same practice. The CMA also issued 19 warnings and three advisory letters about RPM in 2018 to prompt companies to take action in order to ensure compliance.
This ramped-up enforcement action at both the EU and UK level emphasises the importance of companies reviewing their discounting practices and policies on resale pricing to ensure they are not at risk of breaching EU and/or UK competition law.
The content of this page is a summary of the law in force at the present time and is not exhaustive, nor does it contain definitive advice. Specialist legal advice should be sought in relation to any queries that may arise.
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