On 21 July 2016, the UK Competition and Markets Authority (“CMA”) settled a case against an online retailer of posters and frames in connection with a new probe into online sales, after the retailer admitted to using ‘automated repricing software’ to avoid price competition.
Restricting online price competition using automated software
Birmingham based Trod Limited (“Trod”) admitted agreeing with one of its competitors, GB Eye Limited (trading as “GB Posters”), that both parties would not undercut each other's pricing for sales on Amazon’s UK marketplace website, Amazon Marketplace. The parties configured repricing software to implement this arrangement.
Automated repricing software monitors competitors’ pricing and automatically reprices products according to price fluctuations. Such software is commonly used by Amazon sellers, particularly those with a large number of products, and can offer functionalities including minimum price calculations and optimal pricing strategies.
The charge concludes the CMA's investigation which opened in December 2015 with unannounced searches of Trod’s headquarters in Birmingham as well as of the domestic premises of one of its officers. The CMA’s inspection was coordinated with searches carried out by the West Midlands Police on behalf of the US Department of Justice, which is conducting a criminal investigation into sales of wall decor in the US. Trod has agreed to pay a fine of £163,371, which includes a 20% discount to reflect Trod’s admission and cooperation with the investigation as well as resource savings for the CMA.
GB Posters will benefit from immunity, provided it continues to cooperate, as it reported the cartel to the regulator. It is expected that the CMA will issue a formal statement of objections later in July 2016, setting out the CMA’s findings in full and the basis of the calculation of the fine. The fine will only be payable at that point.
This charge adds to the list of cases involving online sales pursued by the CMA in recent months (for example bathroom fittings and commercial catering), underlining the CMA's growing focus on online sales channels.
This most recent case differs from similar cases, in that the infringing parties used automated software to implement the cartel. In its press release, the CMA noted that automated repricing software "can also help sellers compete better, for the benefit of consumers. In this case, however, the parties used repricing software to implement an illegal agreement to deny consumers these benefits".
The regulator issued a fresh warning to online resellers and reaffirmed its commitment to pursue anti-competitive behaviour as it "jeopardises online markets and consumer trust in e-commerce".
This case is also a useful reminder that the CMA (and indeed in this case the US Department of Justice) are not afraid of pursuing relatively small and/or regional businesses. Both companies had turnover of approximately £15 million pounds, according to their latest available accounts. Both companies were also Midlands based, which may give fresh impetus to the CMA’s campaign to increase businesses’ awareness of competition law. The West Midlands was the first region the CMA turned to in this campaign, following the finding from an independent report that only 12% of businesses in the West Midlands were familiar with competition law (compared to a national average of 23%).
People in every type of company, no matter how large or small, need to be aware of competition law and the way in which it impacts on commercial transactions.