The Competition and Markets Authority (CMA) has recently reached conclusions that suppliers of light fittings and retailers / resellers have breached competition laws i.e. Chapter I of the Competition Act (CA) and/or Article 101 of the Treaty on the Functioning of the European Union (TFEU).
The case was opened on 16th August 2016 when the CMA were suspicious that anti-competitive agreements were being made between a supplier of light fittings, National Lighting Company Limited (‘NLC’), and its resellers. The products being investigated were the Saxby and Endon brands of domestic light fittings which included lamp shades, table lamps and wall light fittings.
From August 2016 to November 2016, initial investigations were undertaken. This included information gathering and issuing formal or informal information requests, followed by a review of the parties’ responses to the information request.
On 9th February 2017, the CMA provisionally found that Poole had broken competition laws by restricting national and independent retailers’ freedom to provide discounts online.
The Saxby Agreement
It was alleged that Poole had stopped retailers from setting their own prices online and forced them to sell at or above minimum price. This breaks competition law as the agreement forms a ‘retail price maintenance’ (AKA ‘resale price maintenance’).
On 20th June 2017, the CMA came to the concrete conclusion that Poole, along with Saxby Lighting Limited, Endon Lighting Limited and their parent company NLC, had breached the prohibition under section 2(1) of the CA.
NLC, Poole and Saxby entered into the illegal agreement from 31st October 2012 to 25th February 2013 promising they wouldn’t sell Saxby branded products online below a specified online price (also known as the Saxby Agreement). The agreement had the effect of preventing, restricting and distorting competition within the U.K. and between EU member states. The CMA found this could’ve also affected trade between the U.K. and EU member states directly.
The “Endon Agreement”
NLC, Poole and Endon entered into the illegal agreement from 31st May 2013 to 15th June 2016 promising they wouldn’t sell Endon branded products online below a specified online price (also known as the Endon Agreement).
NLC were found to have engaged in this illegal practice and even tried to avoid being caught by not putting the agreement in writing.
The supplier has now been fined £2.7 million for breaking competition laws. The fine covers illegal agreements made between themselves, Endon and Saxby. It also includes an additional penalty as they had ignored an earlier warning letter from the CMA. Though allegations weren’t formally made at that point, NLC failed to respond when they had the chance.
Importance of competition laws
CMA Senior Director, Ann Pope, highlighted the importance of competition laws:
“…with more and more retail activity moving online, making sure competition works well in this channel is a priority for the CMA. That happens when retailers are free to set their own prices to attract customers using the internet to look for the best deal.”
She noted the severity of clamping down on companies and organisations who are suspected to have breached competition laws. One reason for the close monitoring is because restricting competition can keep prices sky-high and limit choice for consumers. Ultimately, this only ever serves the profit margins of the companies at the direct expense of the consumer.
Warnings for others…
To try to phase out the illegal practice, the CMA reissued advice to help companies and organisations comply with competition laws. This included an open letter, film and case studies on retail price maintenance.
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