The Competition and Markets Authority (“CMA”) issued this past 29th June, 2020, a letter to suppliers and resellers informing and warning the public about the illegality of resale price maintenance. This action comes from a series of ongoing investigations towards musical instrument manufacturers in the UK where it was determined that competitive conditions in the market were disturbed because of the resale price maintenance. These investigations have led the CMA to impose fines that total £13.7 million on musical instrument suppliers. Additionally, the CMA has taken action against a musical instrument retailer for the first time, which has resulted in that retailer being fined as well. Although specifically tailored to the music instrument sector, their final decision serves as a “wake-up call” to all suppliers and resellers taking this illegal behavior. The unhesitant response on the part of the CMA shows that any conduct against fair competition will be prohibited.
A resale price maintenance is not a recent phenomenon, nor has it ever been considered a legal practice. This situation occurs when a supplier and a retailer agree on a certain price, at or between a price floor and price ceiling for the distributor to sell it at. This prohibits the retailer from offering lower prices at its full discretion, making them unable to compete on price. In turn, the consumers will have to pay a higher price.
Yamaha, a leading supplier in the music sector, admitted to illegal actions to the CMA and, in return, received immunity for cooperation, which then opened the floor to the investigation of a total of five musical instrument cases of resale price maintenance. CMA started to apply their monitoring tools, which brought the illegal behaviors of the suppliers and resellers to light. For example, in the investigations of Fender and Casio, separately investigated and fined, it was shown that they knowingly went against the law, as they tried to cover up their impositions on demanding the certain sale price for the retailers.
It was determined that there was illegal behavior in the five cases, as the resale price maintenance imposed was proven to have been imposed.
By the CMA making public their decisions regarding the illegality of resale price maintenance, suppliers and resellers in other sectors are now informed about the consequences these actions can entail. Suppliers must refrain from such conduct, retailers must be aware that action may be taken against suppliers that impose a determined price, and the willful acceptance of such behavior will result in illegal actions on the part of the retailer. The ultimate goal encrypted in this case is to ensure that action must and will be taken in order to preserve fair competition.
Letter issued by the CMA regarding the topic:
Pope, Ann. The Consequences of Restricting Resale Prices: an Open Letter to Suppliers and Retailers in the Musical Instruments Sector., Competition and Markets Authority, 29 June 2020, Available at: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/896119/Musical_instruments_open_letter_290620.pdf
Press Release, CMA:
Cases of reference:
Why we fined Casio £3.7 million for breaking competition law., Competition and Markets Authority, 29 June 2020, Available at: https://www.gov.uk/government/case-studies/why-we-fined-casio-37-million-for-breaking-competition-law
£4.5 million fine for Fender for illegally preventing online price discounts., Competition and Markets Authority, 29 June 2020, Available at: https://www.gov.uk/government/case-studies/45-million-fine-for-fender-for-illegally-preventing-online-price-discounts
Reported by Sarah Sanchez, Student Ambassador