On 20 September 2013, the Office of Fair Trading (the OFT), the main UK competition regulator, issued a Statement of Objections to a sports bra manufacturer named DB Apparel UK Limited and leading UK department stores John Lewis, House of Fraser and Debenhams.
The objections relate to alleged anti-competitive agreements between the bra manufacturer and the department stores under which the parties sought to increase the retail price of the Shock Absorber brand of sports bras in the department stores. The alleged practice was anti-competitive and in breach of Chapter I of the Competition Act 1998 (CA 1998). Under Chapter I, any agreements that prevent, restrict or distort competition (such as through re-sale price maintenance) are prohibited. The prohibition in Chapter I mimics the EU prohibition found in Article 101 of the Treaty on the Functioning of the European Union (TFEU).
Re-sale price maintenance is often a complex issue in the context of distribution agreements. There is the desire of brands and manufactures to promote higher prices for their products against the core prohibition in resale price maintenance that agreements cannot seek to impose a minimum price for resale of a product, either in business to business sales or to end users. There is no such prohibition on setting a maximum price as long as it is not in effect a minimum or fixed price.
This prohibition on restricting competition by resale price maintenance is wide and extends to suppliers enforcing or promoting a minimum resale price. This could be through a variety of mechanisms such as a rebate or promotional fee, payable only if the reseller achieves a certain resale price.
An area of common confusion for international suppliers entering the UK market is the desire to enforce recommended retail prices. The rule in the UK is that suppliers can recommend a retail price for their products, but they cannot directly or indirectly take any action to enforce or induce that recommended price. As explained above, the prohibition has been interpreted widely so only a recommendation of the retail price is acceptable.
Suppliers should seek legal advice when entering into distribution agreements as the fines and negative publicity upon infringement can be severe. Suppliers should be cautious to only negotiate such agreements on a bilateral basis and to make sure they are not discussing pricing intentions with retailers or acting as a conduit for pricing information between competitors.
The next step is for DB Apparel and the accused department stores to submit written and oral representations to the OFT before the OFT makes a decision on whether to take any further enforcement action.
