The Competition and Markets Authority (CMA) recently published an open letter pointing out that retailers, as well as suppliers, could be found liable for breaching competition rules by engaging in resale price maintenance (RPM).
The letter comes in the wake of two financial penalties recently imposed by the CMA on two suppliers for restricting retailers' ability to sell their products online at independently determined prices. The CMA's infringement decisions signal increased scrutiny of RPM in both online markets and shops.
The CMA's letter reminds businesses that "RPM occurs where a supplier and retailer agree that the retailer will sell the supplier's product at or above a particular price". It is also worth remembering that RPM can be achieved indirectly, for example as a result of such parties agreeing to restrict discounts or where a supplier threatens or offers financial incentives to retailers to sell at a particular price or within a certain range.
Although there might be some exceptional circumstances where RPM may not be unlawful, the CMA pointed out that, in the majority of cases, RPM is illegal as it prevents retailers from setting their prices independently to attract more customers.
For completeness, it is worth pointing out that competition law prohibiting RPM will not normally capture agreements between a principal and its agent or intra-group agreements, on the basis that the rules focus on agreements between independent businesses.
Finally, the risks of engaging in RPM are high because it is possible for any company to report any suspicious behaviour within their industry. The CMA also warns that there can be serious consequences for businesses that break the law, including fines of up to 10% of a business’s worldwide turnover.
If you are a supplier, it is important that you review your supply arrangements to ensure that you do not dictate the price at which your products are sold, whether online or through other sales channels. Please be aware that any policies that set a minimum advertised price for online sales can equate to RPM. Suppliers should not offer financial incentives nor should they threaten retailers with higher prices for products to ensure a 'recommended' price.
Retailers should also be aware that if they have agreed with their supplier to sell goods at fixed or minimum prices, both parties may be liable for breaking competition law.
The CMA has produced a range of guidance on its website to help businesses understand more about RPM. If you are still uncertain whether your pricing arrangements comply with the law or whether one of the limited exceptions could apply, please contact a member of our Competition team.
This publication is intended for general guidance and represents our understanding of the relevant law and practice as at August 2016. Specific advice should be sought for specific cases. For more information see our terms & conditions.