Minimum pricing could be breaking the law

The Competition and Markets Authority (CMA) has written an open letter to businesses to say that suppliers can be breaking the law if they restrict their retailers’ prices.

Accompanying the open letter is an at-a-glance guide to the law and comes on the back of two recent cases in which businesses were fined a combined total of more than £3 million for engaging in ‘resale price maintenance’ (RPM).

RPM is defined as when a supplier and retailer agree a minimum price for the supplier’s product that the retailer cannot resell or advertise as being below. More indirectly, it can also apply if, for example, there are restrictions put in place on discounting, which is a particularly relevant issue in the watch industry, especially online.

Ann Pope, CMA senior director, said: “Price competition from online sales is usually intense, given the ease of searching on the internet. RPM, by preventing retailers from offering discounted prices, denies buyers the benefit of the lower prices and increased quality that comes from genuine competition.”

“The CMA is issuing this advice so that all businesses know what to look out for when dealing with the supply and retail of products, whether this is online or via traditional ‘bricks and mortar’ stores,” Pope continued.

Michael Weedon, of the British Independent Retailers Association, had this to say on the matter: “Imbalances in strength between suppliers and retailers can foster conditions where resale price maintenance can occur. All participants in the supply chain need to understand the law, so we welcome these materials, which will help retailers gain clarity on their rights and obligations around pricing restrictions.

“The consequences for businesses that break competition law can be very serious, including fines of up to 10% of worldwide turnover,” Weedon warned.