On 27 March 2014, the UK Competition and Markets Authority (CMA) announced an unspecified, wide ranging competition law investigation into the clothing, footwear and fashion sector.
Whilst the CMA has released few details of the investigation, it has specified that it will carry out the investigation under the Competition Act 1998 using personnel from its civil cartel team. The focus of the investigation will therefore likely be in relation to civil cartel behaviour such as price fixing or market sharing between competitors, rather than any criminal investigation under Section 188 of the Enterprise Act 2002. Civil cartel infringements can include market or customer sharing, bid rigging, price-fixing and attempts to restrict production.
Unconfirmed reports circulating are that the investigation may relate to geo-blocking. Geo-blocking is the practice of blocking online sales across borders by redirecting international customers back to their own domestic websites or blocking the use of foreign delivery addresses or credit cards. This may be done to prohibit customers from benefitting from favourable exchange rates or lower prices for the same product in less affluent countries.
Today, nearly half of EU customers buy goods on-line. As a consequence, the theory goes that any restrictive practices in internet commerce will have a particularly pronounced effect on competition in the retail sector.
However, this is not the first time the CMA has targeted the retail sector. We reported a similar investigation in late 2013 into alleged retail price maintenance for sports bras by a number of retail stores. The results of that investigation were inconclusive and the investigation was quietly dropped by the regulator. Please follow this link for that story.
EU Commission’s E-Commerce Investigation
It might be coincidental but within days of the CMA’s announcement of its inquiry into the retail sector, the EU Competition Commissioner, Margaret Vestager, announced the Commission’s intention to launch an e-commerce sectorial investigation. In particular, the Commission singled out the practice of geo-blocking which it said constitutes a barrier to cross-border online retail.
This inquiry is likely to have potential wide ranging effects on retailers in Europe, no matter where they are located.
Sources close to the EU Commission indicate that the investigation will also focus upon online media such as films and TV programmes and their access across borders.
It remains to be seen whether the EU and UK investigations are linked.
We will be monitoring both of the investigations closely to ascertain their impact on the UK retail sector and commercial practices.