In the run up to the pre-Christmas peak shopping months of November and December, the Competitions & Markets Authority (“CMA”) has launched a campaign against online price fixing. The aim of the campaign is primarily to warn online sellers that discussing and agreeing price levels with their competitors is illegal and can result in serious penalties.
This campaign follows the CMA’s recent decision, following an investigation, to fine an online popular poster and frames seller, Trod Ltd, over £160,000 for breaching competition law. Trod Ltd had agreed with another online poster seller, GB Eye Ltd, that they would not undercut each other’s prices for products sold on Amazon, unless another seller was cheaper than both of them. The online sellers used automated price fixing software to effect this arrangement and this amounted to an illegal price fixing cartel. GB Eye Ltd however received immunity from penalties under the CMA’s leniency policy, as they had reported the price fixing arrangement to the CMA in the first instance.
What is price fixing?
The CMA has released guidance to online sellers which can be found on the Government’s website. This guidance includes warnings as to what price fixing includes, which is as follows:
- agreeing with a competitor what price to charge customers;
- agreeing not to undercut a competitor; and
- agreeing not to sell below a minimum price.
It is also worth noting that competition law applies to small businesses as well as large ones. The two online sellers described above were both small businesses with annual turnovers under £16 million.
This campaign goes hand in hand with the CMA raising awareness by other means, including by engaging with online marketplace providers, which are helping to disseminate the CMA’s advice more widely to online sellers, and writing to online companies reminding them of their obligations under competition law.
“Do’s and Don’ts”
Finally, the CMA has released a short form list of bullet points to online sellers, providing guidance on avoiding price fixing:
- do not agree with competitors that you will not undercut each other;
- do not agree with competitors what price you will sell your products for;
- do not discuss pricing strategies with competitors;
- do ensure that yourself and all staff are familiar with competition law; and
- do consider seeking independent legal advice to ensure compliance with competition law.
Consequences of price fixing
Stephen Blake, Senior Director of the CMA’s Cartels and Criminal Group, reminded online sellers that breaching the above guidance could result in serious consequences saying: “Entering into agreements that limit price competition cheats consumers, is illegal and can have serious consequences for the companies and individuals involved….. As we enter the peak shopping months of November and December, sellers should make sure they have read our advice so they don’t get caught out. The consequences for those who don’t can be serious”.
The consequences of colluding on prices may include company fines up to 10% of worldwide group turnover, director disqualification orders and criminal liability, including imprisonment for up to 5 years and unlimited personal fines.