Lighting company fined for breaching competition law through online price restrictions

Out-Law News | 21 Jun 2017 | 3:23 pm | 1 min. read

A lighting supplier has been fined £2.7 million for requiring retailers to use a minimum price when selling its products online.

The National Lighting Company (NLC) has been imposing a minimum price for its light fittings on retailers, the UK Competition and Markets Authority (CMA) said.

"This kind of illegal practice, known as resale price maintenance (RPM), means customers miss out on the best possible prices and cannot shop around for a better deal on that supplier’s products," the CMA said.

NLC tried to avoid detection by avoiding committing these agreements to writing, the CMA said.

Competition law expert Robert Eriksson of Pinsent Masons, the law firm behind Out-Law.com, said: "This is yet another sign of the CMA taking restrictions on online selling very seriously, particularly when it involves vertical price-fixing agreements between supplier and reseller. This includes, such as in this case, setting recommended retail prices but with a fixed maximum discount off that recommended price, thereby effectively dictating the minimum prices at which resellers could sell products online. Using threats or financial incentives to make resellers stick to recommended resale prices will clearly amount to illegal RPM."

The fine imposed on NLC included an extra penalty because the company ignored an earlier warning letter, the CMA said. Warning letters are sent when the CMA has "reasonable grounds" to suspect anti-competitive behaviour. They are not formal allegations but require a "considered response", it said.

"The fact that the CMA increased NLC's fine by 25% for ignoring such a warning letter serves as a stark reminder to take receipt of such letters seriously and seek legal advice," said Eriksson.

The CMA has also sent warning letters to other suppliers in the light fittings sector where there are reasonable grounds to suspect they may also be engaging in RPM, it said.

The CMA fined bathroom fittings company Ultra Finishing £826,000 for a similar RPM offence last year, and Germany's competition authority is also keen to curb the practice.

"The string of recent decisions challenging online pricing restrictions again demonstrates that the CMA doesn't hesitate to tackle even smaller firms for infringing competition law. While the fine of £2.7 million in this case might not look significant it seems to exceed 2% of the company’s total turnover, and prior to adjustments for leniency and cooperation the fine of £4.7 million was equivalent to 4% of the total turnover. This far outweighs the fine percentage applied in decisions involving serious cartels," Eriksson said.

Ann Pope, CMA director for antitrust, said: "The digital economy is booming and with so many businesses operating online it is vital that fair competition is maintained across all sectors."