Recently we focused on the substantial fines imposed by the Competition and Markets Authority on two suppliers which had attempted to impose minimum prices on online resellers of their products. This is what is known as vertical restrictions on prices – for example, a price restriction imposed by a supplier on a distributor.
Since the above fines were imposed the CMA has recently investigated an illegal cartel entered into between two parties at the same level of the supply chain.
Both parties sold licensed sports and entertainment posters and frames on Amazon Marketplace. The two sellers, Trod Limited and GB eye Limited, agreed not to undercut each other’s prices on Amazon Marketplace. They implemented this agreement for over four years by configuring automated repricing software (which is commonly used by sellers on Amazon Marketplace to keep prices competitive) so that prices would be kept high. Amazon was not involved in the cartel and therefore was not investigated by the CMA.
Cartels are agreements between businesses which are normally competitors not to compete in some way. Such agreements are known as horizontal agreements, and are viewed as the most serious form of anti-competitive behaviour because of how damaging they can be to competition in the market. Indeed, although it did not do so in this case, the CMA has the power to bring criminal proceedings against the key individuals involved in making or implementing a price-fixing cartel involving two or more businesses who sell in the UK. Individuals who are found guilty of the criminal cartel offence can face fines and up to five years’ imprisonment.
The seriousness with which the CMA and other law-enforcement bodies view cartels can be seen by the fact that the investigation into Trod Limited by the CMA was launched with searches of Trod’s offices and the home of one of its directors. The CMA’s searches were coordinated with searches by the West Midlands Police on behalf of the US Department of Justice in connection with a separate US criminal investigation into other activities of Trod.
Trod has admitted agreeing with GB eye that they would not undercut each other’s prices. As a result of its admission, Trod has received a fine of £163,371, after a 20% discount to reflect the savings to the CMA following Trod’s admission and cooperation with the investigation.
You may be wondering what punishment was doled out to GB eye, Trod’s partner in this cartel. The answer is that GB eye received full immunity from fines for being the party to report the cartel to the CMA in the first place. Under the CMA’s leniency policy, a member of a cartel which reports the cartel to the CMA and fully cooperates in the CMA’s investigation will receive full or partial immunity from fines. It can pay to be the party to whistle blow on anti-competitive behaviour!
The CMA has yet again demonstrated its commitment to tackling anti-competitive behaviour which impacts prices. Whilst this time price-fixing took place in an online marketplace, the CMA remains alert to all forms of price-fixing, particularly concerning brands and distributors and distributors and retailers and irrespective of industry.