Three dealers cited in Foster price fixing case

The CMA revealed that Foster engaged in RPM to protect traditional dealers’ margins.

The Competition and Markets Authority (CMA) has released its complete non-confidential report into price fixing in the catering equipment industry.

The government body uploaded the 179-page document to its website, detailing its investigation into Foster Refrigerator and other parties which it believes were operating resale price maintenance (RPM) strategies.

The case file details that three main dealers were party to these agreements – but the distributors’ names have been redacted.

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The CMA suspects that other dealers agreed to the MAP policy but ‘for reasons of administrative efficiency’, it chose to prioritise demonstrating the existence of the agreement with just the unnamed trio.

The report states that between 6 January 2012 and 31 December 2014 Foster Refrigerator UK issued and enforced a MAP policy across its whole product range to its dealer network, preventing them from advertising any Foster appliances below a certain price both online and offline.

The CMA has found the MAP was introduced primarily to improve the margins for dealers selling Foster products and reduce competitive pressure on Foster’s traditional dealers from lower prices available online.

Foster monitored dealers’ websites to check that they were not advertising products below the manufacturers’ MAP and requested dealers to report anyone who was.

If they were, Foster asked dealers to change their prices and threatened to reduce wholesale supply terms, close an account or cease supply if this was not carried out.

Foster told the CMA that it only closed four dealers’ accounts over the period the MAP policy operated. CMA also found evidence that the manufacturer did withhold or cease supply, temporarily or permanently, to distributors which did not comply.

However, the investigation found that the vast majority of dealers were supportive of the policy and did not refuse to adhere to it.

In fact, CMA has found multiple emails between some dealers and Foster employees asking the manufacturer to take action against online distributors who had advertised products at prices below the MAP.

The CMA reviewed 35 Foster dealer websites and found that out of the 26 transactional sites, the final purchase price for the selected product was identical to the price displayed on the homepage.

Foster is said to have concluded its MAP policy following the launch of the CMA’s investigation.

Furthermore, the CMA reports that it has reasonable grounds to suspect that other commercial refrigeration suppliers have attempted to prevent or reduce price competition from online dealers.

However, it stated: “The CMA had to consider how to make the best use of its limited resources. The CMA decided to pursue the investigation into Foster’s arrangements having had regard to the evidence in its possession and the CMA’s Prioritisation Principles.”

Furthermore, the report detailed: “The CMA has reasonable grounds to suspect that Foster entered into agreements similar to the agreements with a number of its resellers.

“However, the CMA has decided not to establish individual bilateral agreements with each reseller selling or advertising Foster products online.

“For reasons of administrative efficiency, the CMA considers it reasonable and proportionate to seek to reduce the number of reseller counterparties to agreements with Foster.”

It also believes Foster’s sister company, Gamko, introduced a MAP in early 2013.

The CMA gave a £2,298,820 penalty to Foster after the initial fine was reduced by 10% for ITW setting up a comprehensive programme to train its staff in competition law compliance, and a further 20% to reflect savings due to ITW’s admission and co-operation with the CMA under a settlement agreement.

These monies will become due to the CMA in their entirety on 26 July 2016.

The full report is available to download here.

Look out for Catering Insight’s coverage of CMA’s address to the industry at the recent CEDA Partners Forum in the forthcoming print issues

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