This article was written by Andrew Morrison (associate)
On 10 May 2016 the UK Competition and Markets Authority (the CMA) fined Ultra Finishing Limited (Ultra) £786,668 for infringement of the Chapter I prohibition and/or Article 101 of the TFEU. The CMA found that Ultra had engaged in resale price maintenance (RPM) with three separate online resellers which had, as its object, the prevention, restriction or distortion of competition. It should be noted that Ultra’s fine was reduced under a settlement agreement with the CMA.
Increasingly, bricks and mortar retailers were complaining about online retailers who were providing heavy discounts leading to extensive price competition. In the face of these complaints Ultra introduced online trading guidelines in February 2012 governing the behaviour of distributors of its Hudson Reed and Ultra branded products. These guidelines included a "recommendation" that online prices should be no lower than 75% of in-store recommended retail prices, i.e. discounts should be no more that 25%.
Whilst the recommendation was expressed not to be legally binding, the CMA’s interpretation of the recommendation and the factual evidence suggested the following:
- online retailers understood there would be adverse consequences if they failed to follow the recommendation;
- Ultra policed online prices to ensure the recommendation was being adhered to; and
- Ultra took enforcement action, including reducing a reseller’s wholesale terms, limiting or withdrawing supply of Ultra products and withdrawing a reseller’s right to use Ultra’s Hudson Reed and Ultra intellectual property to sell the products.
The CMA concluded that Ultra was a party to three separate infringing agreements between 7 February 2012 and 28 August 2014, each of which contained provisions that amounted in practice to RPM.
On 24 May 2016 the CMA settled a separate antitrust dispute with ITW Limited ("ITW") the manufacturers of Foster branded commercial refrigerators, fining the company £2,298,820 for engaging in RPM in relation to online sales. This amount was reduced by 20% for ITW’s admission and cooperation with the CMA’s investigation, and a further 10% for ITW setting up a comprehensive competition law compliance programme for its staff.
Additionally the CMA sent warning letters to 25 other suppliers and dealers of commercial catering equipment in the UK which it suspects may have engaged in similar practices regarding online sales.
EU focus on e-commerce and the Digital Single Market
These decisions are particularly interesting in the greater context of the development of the Digital Single Market across the EU. The CMA has stepped up its investigations into potential infringements in the e-commerce sector, reflecting an increased focus by both national competition authorities and the European Commission to apply competition law to the e-commerce sector.
In recent years we have seen the German and French competition regulators challenging companies, such as Adidas and Asics, over the operation of their online distribution networks. It is clear from recent statements that the Bundeskartellamt, the German competition authority, sees online marketplaces such as Amazon as being a key avenue of competition and one that is susceptible to competition law abuses.
In the UK, the CMA has opened a number of probes into wholesale and retail distribution which are likely to impact online marketplaces. For example, on 1 December 2015 the CMA opened a probe into the online sales of branded sports merchandise. The CMA's investigation has led to a Statement of Objections being issued, on 9 June 2016, against golf club manufacturer Ping Europe Limited for restricting online sales of its products.
Furthermore, on 21 April 2016, the CMA issued an open warning letter to OnTheMarket.com and the estate agents using the service reminding them of their competition law obligations. The CMA drew attention to provisions which limited the number of additional online portals that could be used by agents listing properties with OnTheMarket.com. The CMA noted that there was evidence suggesting that estate agents in a number of local areas may have made a collective decision to join the OnTheMarket portal, removing their business from competing portals (primarily Zoopla and Rightmove); behaviour which could amount to a breach of competition law.
In a further twist, OnTheMarket recently brought a claim in the High Court against an estate agent that listed properties with more than one competing real estate platform, allegedly in breach of the restrictions. The court will now have to consider the legality, under competition law, of the OnTheMarket restrictions before it can order the estate agent to comply with them.