Resale price maintenance: CMA continues crackdown

Giles Warrington and Richard Snape of Pinsent Masons, the law firm behind Out-Law, were commenting after the UK's Competition and Markets Authority (CMA) continued in its recent enforcement action against companies engaging in resale price maintenance (RPM) following investigations it had carried out in the musical instrument sector.  

On 29 June 2020, the CMA announced that it had fined two electronic instrument manufacturers, Roland and Korg, a combined £5.5m for forcing online retailers to sell at or above a minimum resale prices – the prohibited practice known as RPM. These latest cases follow fines the CMA imposed on Casio (£3.7m) and Fender (£4.5m) in relation to RPM, taking the total fines recently imposed by the CMA in the musical instrument sector to £13.7 million.

In a separate case also publicised on 29 June, the CMA announced that it had reached a settlement with GAK, an online musical instrument retailer, after it admitted to engaging in RPM. GAK will pay a fine of £278,945 as part of the settlement deal reached with the authority.

Warrington said: "Notably, this is the first time the CMA has fined a retailer for RPM – usually it is only the brand owner which is the focus of an investigation. A unique feature of this case was that the brand owner involved in the infringement, Yahama, was granted immunity from fines under the CMA leniency regime having first flagged the arrangement to the CMA and cooperated with its investigation. It serves as a useful reminder that either party or both parties to an infringing agreement are susceptible to a fine." 

GAK’s fine was also reportedly increased by 15% due to the fact that the conduct continued even after the CMA issued the company a warning letter.

Richard Snape said: "The CMA regularly sends warning letters to companies in a variety of sectors. Companies should take these warning letters seriously as they provide an early opportunity to make any necessary changes to their practices and avoid further action. Conversely if they are ignored this can be cited as an aggravating factor by the authority and increase the level of a fine if the CMA decides to open an investigation and pursue enforcement. The CMA has previously taken similar action in relation to a company in the light fitting sector, so this is not an isolated event." 

RPM is the practice where a manufacturer or brand owner sets minimum or fixed resale prices for retailers, and applies to both online sales and offline sales. In contrast, recommended resale prices (RRPs) or maximum resale price are generally permissible.

The CMA has been actively investigating RPM for a number of years, stressing that RPM is widely misunderstood by companies across the UK economy, but that this does not provide any immunity from the law. The latest cases follow previous CMA decisions relating to catering equipment, bathroom fittings and lighting; as well as a growing caseload in Europe including an €111 million fine for electronics manufacturers Asus, Denon & Marantz, Philips and Pioneer in 2018. 

The CMA has developed a price monitoring tool to enable it to better recognise where RPM is being used by retailers.

Snape said: "Although the CMA’s current focus has been in the musical instrument sector, in theory, this tool will enable the CMA to detect RPM in other markets much more easily. Therefore all brand owners and retailers need to aware of the rules and change their practices if required."