On 29 June, the UK's Competition and Markets Authority (the "CMA") made a number of announcements regarding certain investigations into resale price maintenance ("RPM") within the musical instruments sector in the UK.

However, these announcements have wider consequences in the context of the CMA's enforcement activities more generally in relation to RPM, with key aspects including that:

  • RPM continues to be viewed by the CMA as a serious infringement of UK and/or EU competition law which will attract substantial fines;
  • the CMA is taking enforcement action for the first time against a retailer for engaging in RPM;
  • the CMA is using an online price monitoring tool to seek to identify instances of RPM; and
  • RPM may result in individuals being disqualified from acting as company directors.

While the CMA has yet to publish infringement decisions in the context of the relevant investigations, this update considers these key aspects, as well as their implications for businesses and individuals.

Further fines imposed for RPM in the musical instruments sector in the UK

On 29 June, the CMA announced that it had imposed fines totalling £5.5 million upon two suppliers of musical instruments.[1]

The two suppliers were fined for engaging in RPM, which was intended to restrict retailers' freedoms to set their own resale prices online, by requiring them to sell the suppliers' instruments at or above minimum resale prices.

Notably, both suppliers used price monitoring software to monitor retailers' online prices in 'real time' and enforce their RPM strategies, with individual retailers reluctant to apply discounts in case they were caught and sanctioned for doing so.

First RPM case brought against a retailer

Separately, the CMA announced that it has taken enforcement action against a retailer of musical instruments for engaging in RPM with another supplier.

This is the first time that the CMA has taken enforcement action against a retailer in an RPM case, and the retailer has agreed to pay a maximum fine of £278,945 in the context of the CMA's settlement procedure.[2]

The supplier in question was granted total immunity from fines under the CMA's leniency programme, on the basis that it was the first to bring the infringing arrangement to the CMA's attention.

The CMA's active monitoring of online resale pricing activities

In connection with these announcements, the CMA published a blog confirming its use of an online price monitoring tool to seek to identify potential instances of RPM.

This tool was created by the CMA's in-house Data, Technology and Analytics unit, and was used during certain investigations into the supply of musical instruments in the UK.

In total, the CMA's investigations into this sector have resulted in fines of £13.7 million (including the £5.5. million in fines outlined above), with the CMA writing an open letter to the sector, emphasising to retailers in particular that:

"If you have agreed to sell at fixed or minimum prices with your supplier, you may both be found to be breaking competition law".[3]

The CMA has now confirmed that its online price monitoring tool will be used in other sectors, so as to enable the CMA to prioritise its enforcement action in respect of RPM.

Director disqualification and RPM

In terms of enforcement action, the CMA's blog also makes clear that, in addition to fines, RPM can "lead to director disqualifications".

As we have considered previously, in recent years the CMA has sought director disqualifications in the context of infringing arrangements between competitors.

However, this latest statement indicates that the CMA would now be minded to (at least) consider pursuing director disqualifications in RPM cases, increasing the personal risks of non-compliance for individuals.

What does this mean for businesses and individuals?

These announcements emphasise the CMA's commitment to taking enforcement action in respect of RPM, and highlight the possibility of individuals being held personally responsible for infringements through director disqualifications.

Against this background, retailers and suppliers should ensure that their arrangements in relation to resale pricing are compliant with UK and EU competition law, including where these relate to the use of price monitoring software.

Where any concerns arise, appropriate advice and action should be promptly taken. Depending upon the arrangements in question, this could include applying for immunity under the CMA's leniency programme, so as to seek to obtain immunity from fines and protection from director disqualification proceedings for cooperating directors.

Footnotes

[1] See, "Musical instrument firms to pay millions after breaking competition law", CMA press release, 29 June 2020.
[2] See, "Musical instruments and equipment: suspected anti-competitive agreements 50565-6", case page.
[3] The CMA's open letter