Competition Law E-Briefing: Fashion sector competition probe

On Tuesday 24 March 2015, the UK’s competition regulator, the Competition and Markets Authority (the “CMA”), opened an investigation into suspected anti-competitive arrangements in the UK clothing, footwear and fashion sector which may infringe UK or EU competition law.

The CMA will now conduct an initial information gathering exercise, using both its formal and informal powers to request information.  This information gathering process will continue until September 2015, during which time the CMA will evaluate parties’ responses and decide whether it has enough evidence of wrongdoing to proceed to a full investigation.  It is expected to make a decision on whether to proceed or close the investigation in October 2015.

At this very early stage, the CMA has declined to reveal which part of the sector it is investigating, whether the investigation is nationwide or local, or the exact nature of the conduct suspected by the CMA.

The CMA has revealed that an inquiry team headed by lead investigators Len Wassell and Helen Cameron, and Stephen Blake, head of the CMA’s cartels and criminal group, has been set up to gather information.  Although the CMA has not revealed details of the suspected conduct, the involvement of Stephen Blake in particular may well give an indication of the seriousness of any suspected infringement.

Since it came into existence in April 2014, much of the CMA’s highest profile work has been on the market investigations side, including major investigations into the energy market and retail banking sector.  Market investigations allow the CMA to investigate features of a market or markets – falling short of competition law infringements – that may restrict competition.

It is clear however that the CMA remains highly focused on rooting out and pursuing cartels, including criminal cartels.  The CMA’s cartels and criminal group recently launched a recruitment campaign aimed at increasing the size of the group by more than a third by the end of March 2015.

At this stage, it is too soon to say what the likely outcome of the CMA’s investigation is.  Potential consequences include fines of up to 10% of group worldwide turnover, and in common with the European Commission and other national regulators, we can expect to see the CMA’s fines for the most serious cartel conduct get close to this cap.  Cartel damages claims are also an increasing phenomenon, with EU and UK legislative changes afoot to make these easier.  There are also serious consequences for individuals involved in a cartel including the potential for up to 5 years’ imprisonment. The CMA can apply to the court to have individuals disqualified from acting as company directors if their conduct in connection with any infringement suggests that they are unfit to hold the office of director.

As day-to-day trading in the retail sector can generate a multitude of competition law issues, retailers and theirs suppliers would be well advised to ensure their competition law compliance programmes are refreshed and up to date, and that their staff know what they can say and do and what to look out for.  It is clear that the retail sector remains under the spotlight.