CMA issue substantial Fender competition breach fine

First published by Author on January 30, 2020 in the following categories: Price Fixing Price Hikes Pricing Selling Restrictions and tagged with cma | competition law | price fixing | pricing

The Competition and Markets Authority (CMA) has issued a substantial Fender competition breach fine in the sum of £4.5m.

The fine has been issued almost two years after an investigation into the prominent guitar maker was opened. In its ruling, the CMA has confirmed that Fender has admitted to breaking competition law by restricting prices for UK retailers. The fine that has been issued is therefore subject to the CMA’s leniency and cooperation protocols, which can see penalties reduced.

This is a key ruling given the size of this growing market and the fact that Fender is one of the major players in the sector.

History of the CMA’s anti-competitive practices investigation into guitars

The Fender competition breach fine has come after almost two years of investigation work carried out by the regulator. The focus of their work has surrounded previously alleged anti-competitive agreements and practices in relation to the sale of musical instruments and equipment.

A penalty notice was issued in March 2019 against Fender Europe on the basis that it had failed to comply with a request to supply documents deemed key to the investigation. They were issued with a fine of £25,000.00 for “hiding relevant documents” during an inspection of the company’s UK headquarters.

In October 2019, the CMA then issued a statement of objections that outlined the regulator’s belief that Fender Europe Limited had broken important competition law.

Fender competition breach fine issued

Last week, the Fender competition breach fine was announced by the CMA.

The amount of the fine has been issued at £4.5m, which has accounted for a 60% discount under their leniency policy given the admissions, and a further 20% discount having agreed to a settlement. The purpose of the leniency policies is to help the CMA stay efficient by reducing their time and resources in having to prolong investigations and fight companies that defend cases.

The CMA has confirmed that Fender has admitted that it has acted illegally. In terms of what happened, between 2013 and 2018, Fender reportedly imposed minimal pricing requirements. This is known as retail price maintenance and can result in consumers finding that they’re paying the same price even when they shop around. This kind of pricing can lead to customers missing out on better deals.

Deliberate cover-up

A damning side story to the Fender competition breach fine is the reports of a cover-up which were briefly outlined above.

The CMA has reported that employees deliberately attempted to cover up their actions by intentionally not recording information in writing. Evidence was eventually uncovered following a thorough search of Fender’s IT systems, where emails and mobile phone communications were reviewed.

This is a sinister twist in this penalty tale, and as an owner of two Fender guitars myself, I’m personally not impressed.