On 21 June 2016, the Competition and Markets Authority (‘CMA’) published further guidance on the restriction of online resale prices in the form of an open letter, noting the growing importance of online sales channels, and affirming that it “takes resale price maintenance seriously and is focused on tackling anti-competitive practices that diminish the many benefits of e-commerce”.

Background

The CMA’s letter comes in the wake of two recent resale price maintenance (RPM) cases in May 2016 in relation to online sales. The UK watchdog imposed large fines on a catering equipment supplier and on a supplier of bathroom fittings for enforcing minimum online resale prices. It signals increased scrutiny of online sales channels and vertical agreements by the CMA generally.

New guidance

The CMA notes that it is publishing this open letter to raise awareness of RPM practices and help suppliers and retailers understand and identify them better. The UK regulator reaffirms that RPM, which may be enforced directly or indirectly, amounts to vertical price-fixing and is illegal in the large majority of cases, although it does note that there are some very exceptional circumstances in which imposing minimum resale prices may be deemed lawful. The letter considers the CMA’s two recent RPM infringement decisions, highlighting the differences between direct RPM (as was the case in the catering equipment case) where minimum resale prices are imposed and enforced as such, and indirect RPM (as was the case in the bathroom fittings case) where minimum resale prices are fashioned as ‘recommended’ prices or in other forms but are in fact enforced by suppliers as minimum resale prices (by threats to increase prices, cease supply or other forms of commercial threat).  The communication also contains helpful guidance for market participants:

  • Suppliers must not dictate resale prices, cannot impose minimum advertised prices if those would amount to RPM, and must not enforce minimum resale prices through the use of threats, financial incentives or other means.  
  • Retailers should be free to set their own prices (both online and in bricks-and-mortar stores), should not be bound by minimum resale prices imposed by their suppliers, and may also be found in breach of competition law if they willingly sell at fixed or minimum prices.

The CMA ends its letter by inviting retailers and suppliers to report any suspicious behaviour within their industry that may amount to RPM or other anti-competitive arrangements. 

Analysis

This new guidance serves as an additional reminder from the CMA that any attempt to restrict competition between online retailers will be regarded as a serious breach of competition rules. 

The CMA is intent on providing comprehensive guidance to businesses – its open letter of 21 June 2016 is supplemented by other RPM-specific guidance material including a short guidance leaflet, a short video guide and case studies.