ITW’s Foster Refrigerator brand has been fined over £2m by the Competition and Markets Authority (CMA) after breaking competition law by restricting dealers from offering online discounts.
The CMA today imposed a fine of £2,298,820 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.
The CMA had issued a formal allegation against ITW in January 2016, and the business has now admitted that it engaged in resale price maintenance (RPM) in internet sales of its Foster commercial fridges from 2012 to 2014.
RPM is vertical price-fixing in which a supplier restricts the ability of a retailer to determine the price at which it will resell the supplier’s products, for example by requiring the dealer to sell at a particular price or only above a minimum price.
The CMA detailed that RPM is illegal because it stops dealers setting their prices independently to attract more customers.
The authority has produced guidance and a short video to help businesses understand more about RPM.
According to the CMA: “Foster Refrigerator operated a ‘minimum advertised price’ (MAP) policy and threatened dealers with sanctions – including threatening to charge them higher cost prices for Foster products or stopping supply – if they advertised below that minimum price.”
The CMA found that Foster’s MAP policy constituted RPM because, by restricting the price at which its goods were advertised online, it prevented dealers from deciding the resale price for those goods.
The government body found that there is a clear link between the advertised price and the resale price when goods are purchased online.
The CMA has sent warning letters to 20 other businesses in the commercial catering equipment sector which it suspects may have been involved in similar internet sales practices.
The warning letters have been sent to suppliers of commercial catering equipment that may have implemented MAP polices and also to dealers that may have agreed to apply the policies imposed by their suppliers.
A warning letter does not itself mean that a company has been found to have broken competition law.
However, if necessary, the CMA will also take further enforcement action against companies which participate in RPM.
Catering Insight contacted Foster, and the company made the following statement: “ITW Limited has accepted the findings of the CMA in relation to the online MAP policy that was operated by its division, Foster Refrigerator.
“ITW Limited takes its legal obligations extremely seriously and has fully cooperated with the CMA. It is committed to complying with relevant competition law.”