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Resale price maintenance is when a supplier sets a minimum price at which other businesses can resell their products. It is illegal under the Competition Act 1998. This was recently brought to the fore when the Competition and Markets Authority (CMA) issued a Statement of Objections to a supplier of domestic lighting products.
Competition Act 1998
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The facts of the case
DAR Lighting Ltd has been accused of restricting retailers from setting their own online prices between 2017 and 2019. It is alleged that the company set a minimum price, meaning retailers could not offer a discount on those goods.
Resale price maintenance
This practice is known as resale price maintenance (RPM) and it is unlawful. This is because it restricts competition, preventing customers from shopping around for a good deal. RPM can apply to goods sold in shops and online. A supplier can be guilty of RPM if a retail price is imposed on the retailer. A retailer can also be guilty of RPM if they agree not to sell below a minimum level.
Statement of Objections
The CMA has now issued a Statement of Objections to DAR Lighting Ltd. This is a notice warning the recipient that they are suspected of breaching Chapter 1 of the Competition Act 1998. Both parties are invited to make representations on the matter. Afterwards, the CMA will make a final decision as to whether the law has been broken.
What are the penalties?
If DAR Lighting Ltd is found guilty, the CMA can impose a fine of up to 10% of worldwide turnover. The fine can be increased if the CMA finds that the law was broken intentionally.
A fine of up to 10% of worldwide income can amount to a substantial sum, as seen in previous cases. Another company in the lighting sector, The National Lighting Company Ltd, was fined £2.7 million in 2017. The fine included an extra penalty for failing to respond to an early warning letter, and for trying to avoid detection by not having written agreements.
In the past two years, the CMA has fined a further eight companies for resale price maintenance. This includes five musical instrument companies, such as GAK, which was fined £278,945.
solicitors – England and Wales
Guidance regarding the Competition Act 1998 can be found on the CMA’s website. We recommend suppliers and retailers familiarise themselves with the law so as to avoid falling foul of the rules.
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