Electronic drum sector appeal denied by Competition Appeal Tribunal

First published by Author on April 06, 2022 in the following categories: Consumer Law Industry Investigations and tagged with cma | competition law | consumer law | investigations | musical instruments

Following an investigation by the Competition and Markets Authority (CMA) into alleged anti-competitive practices in the electronic drum sector, the Competition Appeal Tribunal previously rejected an appeal made by musical instrument company Roland. Roland had reportedly taken issue with the nature of a fine that it had previously agreed to pay.

As part of the settlement of the CMA case, Roland had been fined £4m for reportedly breaching competition law. As a result of the failed appeal and Roland’s reported breach of the settlement bargain, the fine was understood to have been increased to £5m.

The judgement made by the Competition Appeal Tribunal (CAT) showed it is not inclined to be lenient towards companies found guilty of breaking competition law. As advocates of consumer rights and fair business, we believe it is vital that organisations are punished accordingly if they break the law, and the CMA’s fines can have a powerful dissuasive effect on companies upon which they are imposed, and on companies in general. The upheld decision in the electronic drum sector case seems to be, therefore, a positive move by the CMA.

Electronic drum sector – the CMA’s investigation

In April 2018, the CMA announced that an appeal into potential anti-competitive practices in the electronic drum sector had been launched. The investigation reportedly later found that Roland had unfairly restricted the “online discounting of electronic drum kits between 2011 and 2018”, according to the CMA. The settlement of two cases against Roland and Korg was understood to have been made in June 2020, and followed previous fines issued to two other musical instruments companies, Casio and Fender.

In total, Roland and Korg were hit with £5.5m in fines, with £4m of the penalty targeted at Roland. Roland’s fine was reduced in accordance with the CMA’s policy in respect of leniency. The CMA agreed to a 20% settlement discount for Roland’s agreement to accept the judgement.

The outcome of the CAT appeal

Despite reportedly agreeing to the amount of the fine in its settlement bargain, and admitting to what had happened, Roland took the decision to appeal to the CAT regarding the amount it had been required to pay. In the appeal, Roland argued that its anti-competitive practices in the electronic drum sector were not grave enough to warrant the £4m fine, aiming to achieve a bigger discount.

The appeal was subsequently dismissed by the CAT. In fact, the decision to appeal came back to bite Roland, as the CMA then took the decision to revoke its previous leniency and raise the fine to £5m as a penalty for Roland’s reported breach of the settlement agreement.

The impact of the CAT judgement

The implications of the CAT judgement can extend far beyond the electronic drum sector, sending a more general message about the CMA’s intolerance for companies trying to reduce penalties. The decision may well set a precedent for future appeals to the CAT, as highlighted by Executive Director of the CMA, Michael Grenfell:

“[…] when a company agrees to end an investigation through a settlement, it cannot reopen the question by appealing without losing its discount. This reinforces the CMA’s view that settlements should be final.”

As such, those companies that benefit from discounts in their settlements may be met with an increased fine in the event that their appeal is unsuccessful. This will surely act as a deterrent to the more unwarranted or baseless appeals that could take place.