Competition authority issues warning over online sales bans

Out-Law News | 09 Jun 2016 | 3:27 pm | 2 min. read

The UK's main competition watchdog has warned companies not to impose online sales bans after raising concern with alleged practices deployed by a major golf equipment manufacturer.

The Competition and Markets Authority (CMA) said it is its provisional view that Ping has breached UK and EU competition rules by preventing retailers from selling Ping golf clubs over the internet.

The CMA's findings are not final and Ping has an opportunity to make submissions to the regulator in response to the statement of objections that has been issued in the case.

UK and EU competition laws place a general prohibition on agreements between businesses that have as their object or effect the prevention, restriction or distortion of competition. Companies can be fined up to 10% of their annual global turnover if they are found to have infringed those rules.

"Where traditional businesses operating through high street shops face intense competition from online sales, suppliers may be tempted to respond by introducing practices, like online sales bans, that can restrict such competition," Ann Pope, the CMA senior director leading the regulator's work in the case, said.

"The internet is an increasingly important distribution channel and retailers’ ability to supply via this channel should not be unduly restricted. This drives competition among rival retailers because they compete to attract consumers who are using the internet to shop around for the best deals. Bans on internet trading can be a problem if they seek to prevent retailers reaching a significant proportion of customers. We will now consider any justifications put forward by Ping for the alleged conduct," she said.

This is the most recent example of concerns the CMA has raised about online distribution. Last month it highlighted concerns about retail price maintenance (RPM) practices after imposing a fine of £2.3 million on a fridge supplier over conditions the company placed on the resale price of its products for internet sales.

The CMA said ITW Ltd, through its Foster Refrigerator division, had employed a ‘minimum advertised price’ policy that restricted the price that its goods could be advertised for online by distributors. The company threatened to charge its dealers "higher cost prices for Foster products" or to stop supplying the products altogether if the distributors advertised the fridges below the minimum price, the CMA said at the time.

"RPM is illegal because it stops dealers setting their prices independently to attract more customers," the CMA said. "Whilst the CMA has decided only to impose a penalty on the supplier in this case, dealers should be aware that they can also be fined for entering into RPM agreements with suppliers."

Competition law expert Angelique Bret of Pinsent Masons, the law firm behind Out-Law.com, said: "There have been very few RPM infringement cases in the UK, despite the fact that these arrangements exist, we imagine because most cases which have come to the CMA’s attention in the past have been dealt with informally or with a warning letter. The CMA sent a very clear warning that such arrangements can attract fines. It is particularly significant that the CMA has made it clear that fines could be levied not only on the supplier but also on the distributors."