Competition and Markets Authority issues £2.8 million fine to two furniture suppliers for anti-competitive behaviour

First published by Admin on March 27, 2017 in the following categories: Investigations and tagged with cma

The Competition and Markets Authority has issued a hefty £2.8 millionfine after two suppliers of products to the furniture industry admitted to anti-competitive behaviour.

The CMA opened their investigation in March last year after two suppliers of drawer wraps and fronts were suspected to be conducting illegal cartel agreements to share the market. As a result of the investigations, fines in the millions have been issued after breaches were identified.

In order to maintain a fair and competitive environment for all participants in every industry, the Competition and Markets Authority (CMA) regulates and restricts certain behaviour. Here, in regulating the supply of products to the furniture industry, the CMA found both Thomas Armstrong (Timber) Ltd and Hoffman Thornwood Ltd to be engaging in illegal commercial behaviour; particularly in pricing, by bid rigging and exchanging confidential competitive sensitive information.

There were two separate infringements:

• Drawer wraps cartel: the supply of chipboard and MDF-based drawer ‘wraps’ by BHK and Thomas Armstrong; resulting in a maximum fine of £1,509,000;
• Drawer fronts cartel: the supply of chipboard and MDF-based drawer fronts by Thomas Armstrong and Hoffman Thornwood; resulting in a maximum fine of £684,000 for Armstrong and £688,000 for Thornwood.

Breaches confirmed

The anti-competitive behaviour exposed by the CMA infringes Chapter 1 of the Competition Act 1998 as well as contravening Article 101 of the Treaty on the Functioning of the European Union. These laws are there to ensure every ‘player’ has a decent chance of entering and engaging in the market.

If established players do something – like severely reduce their prices to an anti-competitive rate – newcomers may not be able to afford to match those prices. A competitive market is important to allow consumers to have a whole range of choice from different providers, and ensure they get a fair deal. It also allows for newcomers to bring new and innovative products to challenge existing ones too.

Stephen Blake, CMA Senior Director for Cartels, said:

“When competitors collude like this, they do so at the expense of customers, increasing prices, and reducing quality and choice. In this case, the collusion concerned products which are found in furniture in homes and offices across the UK.”

Admission of anti-competitive behaviour

The two suppliers in this case admitted their anti-competitive behaviour by creating a cartel. They have now agreed to pay the fine imposed by the CMA.

The £2.8million fine is at a discounted rate (-20%) since the liable suppliers admitted their wrongdoing by themselves. This saves the CMA a lot of money in resources in continued investigations. The discount also includes consideration that both suppliers reportedly co-operated with the investigations and didn’t do anything to hinder it; for example, by hiding or destroying relevant documents.

Another supplier, BHK (UK) Ltd, admitted their lesser involvement in the anti-competitive behaviour. The CMA initiated their Leniency Policy and decided not to issue a fine. However, this is under the condition that they continue to co-operate with the CMA and comply with the Leniency Policy in full.

The CMA will issue a formal infringement decision with the final costs and findings. When it has done so, the two companies must pay the fines and comply with any other remedial actions imposed.