Price fixing has become a hot topic for the catering equipment industry since the Competition and Markets Authority (CMA) revealed it was investigating the sector over such practices almost 2 years ago.
With the market watching out closely for news and guidance about the issue – a notoriously thorny one given the complexity of online sales – the results of a parallel probe in a separate sector announced by the CMA today will be digested with interest.
When the CMA revealed in January it would be looking closer into possible breaches of competition law by manufacturers introducing a minimum advertised price (MAP) for internet sales, it pointed the finger at Foster Refrigerator, but also in an unconnected case, at a bathroom fittings manufacturer called Ultra Finishing.
This morning, the results of the latter case were announced, with Ultra receiving a fine of £786,668 for preventing retailers from discounting online prices following the closure of the investigation.
If nothing else, the magnitude of the fine serves to highlight exactly how serious the CMA takes the topic and the sort of financial penalty it is prepared to levy if a company is found guilty of breaching competition law.
It could have been worse for Ultra. The CMA stated that as the company admitted its infringement, a discount of 20% was applied to the fine.
Furthermore, as the manufacturer has now agreed to set up a programme to help ensure competition law compliance within its business and among its staff, a further 5% discount was implemented.
Given the original fine would have been well over £1m, co-operating with the CMA is clearly in manufacturers’ best interests if any practices have been breached. Under the current regulations, any business found to have infringed the Competition Act 1998 can be fined up to 10% of its annual worldwide group turnover.
There was also another pertinent point to emerge from Ultra’s case: no distributor or dealer of its products was fined or even publicly accused of participation in price fixing.
Should catering equipment dealers extrapolate from this that they have nothing to fear financially if they are caught up in such cases in future? It is difficult to say, but certainly in this instance the blame has been squarely laid at the doors of the manufacturer.
As I said, it is important to stress that the Foster case is a completely separate one to the investigation involving Ultra and that no final conclusion has yet been reached on whether the refrigeration manufacturer has done anything wrong.
But whatever outcome is eventually reached, the way in which the CMA has dealt with the Ultra case is a reminder to any industry, not just the catering equipment business, that it won’t be afraid to act if it feels the law has been broken.
The rules that govern vertical price-fixing might, at times, seem complicated, contradictory and even unfair by some in the industry, but in the eyes of the CMA it’s all very simple: resale price maintenance (RPM) is illegal because it prevents dealers and retailers from offering lower prices and setting their prices independently to attract more customers.