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Restricting retailer freedom to discount prices

View profile for David Wisbey
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Previously, I have written about suppliers of products getting into trouble for limiting price discounts on their products. Now Casio, the supplier of digital pianos and keyboards, has received a record fine of £3.7 million. This is for restricting retailer freedom to discount the price of Casio digital pianos and digital keyboards supplied online.

In a settlement agreement with the UK Competitions and Markets Authority (“CMA”), Casio admitted that, between 2013 and 2018, it unlawfully had a policy designed to restrict retailers’ freedom to set prices online. Retailers had to sell digital pianos and keyboards at, or above, a minimum price. Casio monitored the retailers’ prices and pressured them to modify or raise their prices online when they fell below the specified minimum price.

Software was used to check the online prices in real time. This meant that retailers had less incentive to discount, for fear of being caught. There was also an element of snitching, in that some retailers reported to Casio if they spotted other retailers discounting its instruments.

Did you pay too much for your digital piano? 

If you bought a Casio piano or keyboard online in the relevant period, the answer is that you probably paid too much. Unfortunately, the agreement reached with the CMA, and the large fine paid by Casio, won’t help you get any money back on your purchase. If you are in the market for digital instruments now, however, prices should be more competitive. The CMA has four other investigations underway in connection with the sale of musical instruments and equipment.

Casio’s behaviour was a breach of UK and European competition law. The Competition Act prohibits agreements that have as their object or effect the restriction of competition within the UK. The Act refers explicitly to the direct or indirect fixing of purchase or selling prices as an activity which falls within the prohibition. The EU treaty (which still applied to the UK at the time of writing!) has a similar rule where trade is within the EU.

If you are a seller of products online, rather than a buyer, you must be careful not to carry on any behaviour that could be considered to be price fixing. Too many sellers assume it is legal to set the price at which other businesses can resell their products.

The CMA is keen to police restrictive price practices in online sales, to ensure that the public gets all the benefits of e-commerce. Since 2016, it has fined companies for price fixing in the light fittings, bathroom fittings and commercial refrigeration sectors. During 2018, the CMA issued 19 warnings and three advisory letters to companies to alert them to the illegal nature of the practice.

How to deal with online pricing 

Key points for suppliers:

  • Never dictate the price at which your products are sold (whether online or via any other sales channel).
  • Policies that set a minimum advertised price for online sales can amount to restrictive pricing and are usually illegal.
  • Never use threats, financial incentives or other actions to make resellers stick to recommended resale prices.

Key points for resellers:

  • You are entitled to set the price of the products you sell, whether online or via any other sales channel.
  • Suppliers are not usually allowed to dictate the prices at which you sell or at which you advertise their products online.
  • If you agree to sell at fixed or minimum prices with your supplier, you may be found to be breaking competition law and could face a fine.

If you need guidance about how to deal with online pricing, whether you are a supplier or reseller, please contact our expert solicitors. I am a commercial and corporate finance lawyer based in our Chelmsford office and can be contacted on 01245 453817 or david.wisbey@birkettlong.co.uk.

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