On 17 April 2018, the Competition Markets Authority (CMA) began a formal investigation into suspected anti-competitive practices in the musical instrument industry.
The CMA reportedly had reasonable grounds to suspect Yamaha of a competition law infringement. Yamaha was thought to be involved in anti-competitive practices and/or concerted agreements with at least one UK seller.
Given the value of this growing market sector, this is an important investigation for the CMA to have undertaken.
Investigation into anti-competitive practices in the musical instrument industry
Conducting their investigation, the CMA focused on gathering evidence from March 2013 onwards and looked into pianos and keyboards manufactured and sold by Yamaha, a month later expanding the investigation to cover guitars.
The reported arrangements by Yamaha meant the price at which musical instruments supplied by Yamaha was advertised online by resellers, and was allegedly restricted. This meant that Yamaha was seen to be engaging in Resale Price Maintenance (RPM) and, as such, suspected of anti-competitive practices.
CMA’s conclusion
On 17th July 2020, the CMA issued its decision – a decision that found that GAK (GAK.co.uk Ltd; The Guitar, Amp & Keyboard Centre Ltd; GAK.co.uk (Holdings) Limited) and Yamaha Music Europe GmbH had engaged in resale price maintenance. As a result of their behaviour, a finding was made that they are in breach of important competition laws.
Admissions have been made, and GAK received a 20% discount on the financial penalty it has been issued with, in accordance with the CMA’s leniency policy. This procedure means that a company that admits their illegal activity and co-operates can receive a reduced fine. Yamaha Music Europe GmbH received full immunity and has not been issued with a financial penalty so long as it meets the requirements of the CMA’s leniency policy moving forward with regards to the investigations.
The CMA imposed a fine of £278,945 on GAK (for which the 3 GAK companies are jointly and severally liable). The fine reflects the 20% discount due to the companies’ admissions and their co-operation with the CMA under a settlement agreement.
What happens next
The CMA published an open letter to the musical instruments industry warning them of anti-competitive practices.
A key part of this reads as follows:
‘The CMA takes RPM seriously and is focused on tackling anti-competitive practices that diminish the many benefits of e-commerce. Online RPM short-changes customers because they cannot shop around for a better deal. Customers have been shopping online more and more over time. During the coronavirus outbreak and beyond, we expect this trend to continue. This underlines the importance of fair online competition.’
A number of other warning letters have also been issued by the CMA to musical instrument suppliers and retailers. Advice therein is to review their business practices to make sure that they are fully complying with important competition laws to avoid any breaches arising in the future.
Following extensive investigations to monitor alleged anti-competitive practices, the CMA has created an in-house price monitoring tool. This tool can allow the CMA to monitor online pricing, making it easy to detect suspicious pricing activity. Its goal is to deter organisations from entering agreements to restrict online discounting and breach competition laws as a result.