RRPs are a way of life for many businesses. It’s the ‘else’ where the devil lurks and where lots of businesses trip up. Price-fixing… Cartels … Everyone in business these days knows that those are dirty words and to be avoided. But as the evidence shows, avoiding them is not always a simple matter.
At the end of April 2016, Ultra Finishing Limited, a bathroom product supply company, agreed to pay a fine of £826,000 to the Competition and Markets Authority for anti-competitive behaviour between 2012 - 2014.
Ultra supplied their bathroom products to online retailers and made suggestions on the recommended retail price at which the products should be sold. This is not against the law.
But when those retailers offered a discounted rate on Ultra’s products, Ultra strongly objected and threatened the retailers with financial penalties, and with the withdrawal of licensing rights on the use of Ultra’s images and/or cessation of their supply to those discounting retailers. This left the retailers little choice if they wanted to continue to sell Ultra's products. The outcome of this situation is a form of price-fixing and it is against the law because it reduced the online retailers’ ability to offer discounted prices to consumers. The ultimate consequence was that consumers ended up paying a higher price than they would have done, had Ultra not stripped away the online retailers’ freedom to price as they wanted.
It’s important to understand what happened here as far as the Competition and Markets Authority was concerned. At first sight, it might look like only Ultra was at fault for this price-inflating outcome. However, on the information available, it appears that the online retailers gave in and carried on trading with Ultra, in spite of being prevented from offering more favourable pricing terms that fell below Ultra’s RRP. This meant that an unlawful price fixing agreement was created between Ultra and the retailers. Interestingly, the regulator has indicated that it is exercising its right not to impose any penalties on the retailers even though they were party to an anti-competitive agreement. Only Ultra has been fined.
Competition law protects consumers and the deals that they’re offered when they come to buy what they want. So almost all conduct or arrangements that result for example, in consumers paying a higher price than they would otherwise have done, or having a more limited choice of products, or a lower quality offering, than they would otherwise have been offered, is considered a sure fire indication that something anti-competitive may have occurred higher up the supply chain and warrants investigation. On many occasions, what triggers that investigation is a complaint by someone affected by this conduct, such as consumers, supply chain customers, retailers and distributors.
The Competition and Markets Authority has published guidance on this topic. It can be found here and we also cover this briefly in in our LHS guide to getting you started in business – click here to access our guide.
If you’re worried about the terms that you have agreed with a supplier or a distributor or someone is trying to impose unfavourable terms on you, you can get in touch for a friendly chat or some further guidance about how to resolve this situation swiftly and effectively.
Ultra issued to retailers so-called ‘recommended’ retail prices for online sales. Despite being described as recommendations, which are lawful, Ultra threatened retailers with penalties for not pricing at or above the ‘recommended’ price, including charging them higher prices for products, withdrawing their rights to use Ultra’s images online, or ceasing supply. This limited the retailers’ ability to offer discounts to potential buyers.