Industry reacts to CMA probe

On 16 February the Competition and Markets Authority greenlit its investigation into suspected breaches of competition law relating to vertical arrangements (agreements between firms at different levels of the supply chain) between certain suppliers and resellers in the commercial catering equipment sector.

Catering Insight reviews the comments received on this site since the news broke.

Paul Bowers, sales and marketing director of water boiler manufacturer Calomax wrote: “We’ve all seen the letters sent out by certain manufacturers stating that they would consider withholding supplies to any customers who offered their product below the selling price set by them.

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“That is anti-competitive price-fixing and it is illegal. The companies that used such strong-arm tactics have been caught out and should be brought to task.”

However, Simon Lloyd, operations director at dealer Lloyd Catering Equipment responded by saying that it’s distributors’ margins under threat and not manufacturers’. “Personally I do not see anything wrong with trying to protect a reasonable margin. It’s not a case of being greedy either, rather maintaining an element of fairness.

“We are in the main a service-led industry and as such have overheads to cover. Yet our industry in the past has had its problems with internet cowboys and suchlike.

“Protecting a reasonable advertised price that would allow a dealer to provide an appropriate level of service to accompany a product was a forward-thinking way to try and ensure that something like this didn’t happen to the same extent again.

“It’s all well and good for a manufacturer to comment, given that they will make the same margin regardless of the uplift the supplier might apply.

“The truth is that minimum advertised pricing (MAP) happens in loads of industries; it is literally all around us. For instance, iPads and iPhones can be purchased from many retailers in addition to Apple.”

Another anonymous commentator added: “In the US, MAP is in place, although I don’t understand fully how that doesn’t breach antitrust law.

“I think it’s impossible to say what will happen in the next couple of years. The low-margin drop shop dealers like Shop Equip are doing well for now. As soon as base rates increase they may find life very tough on those margins. So maybe they will disappear, or increase their prices in a year or two, as the economy recovers. If they do that, will they be turning over as much volume?

“Some brands think that eBay, Amazon and other networks will be their biggest dealers, but they take significant commission, so I don’t see that happening. Selling through networks right now at least is less lucrative than you may think.

“One thing’s for sure, the dealer networks are going through tough times and things will radically change over the next few years. The volume of online sales is increasing all the time. If the brands cannot take steps to protect margins then all this is inevitable.

“But the investigation may conclude that it’s permissible to protect prices with MAP etc for the livelihood of dealer networks and jobs. It’s not as black and white as many predict. And then what will happen? Physical dealers with stock and premises etc will be back in the game.”

Nick Brandrick, MD of maintenance and servicing company Catercall Technical Services added his voice to the debate: “There are margins and then there is price fixing. It’s much fairer if it’s a level playing field, and of course companies have nothing to fear if they haven’t been involved.”

Lloyd agreed that price fixing is not fair, however he does not think it is a level playing field. “If manufactures will (as some do) supply so-called distributors who operate without even having a business premises, a service department or the facility to produce drawings, yet are more than happy to quote for equipment on one of my drawings, how could this ever be called a level field?

“This type of scenario thankfully used to be more common than it is today, but I can’t help but believe it could soon return.”

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