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A Classic Online RPM Case in the UK
On 1 August 2019, the UK Competition and Markets Authority (CMA)
it had fined digital piano and keyboard supplier Casio £3.7 million for
engaging in illegal resale price maintenance (RPM). The case relates to a
simple and easily identifiable example of illegal behavior, which perhaps
should have been picked up by internal compliance training or audits.
The CMA found that Casio implemented a policy designed to restrict
retailers’ freedom to set their own prices online between 2013 and 2018,
requiring them to sell at — or above — a minimum price, and so preventing
them from offering price discounts. It monitored prices and pressured
retailers to modify or raise their prices online when they fell below the
specified minimum price.
A simple requirement to sell at or above a minimum price, whether online or
offline, is a classic example of illegal RPM. The CMA and other competition
regulators in the EU and worldwide have pursued numerous similar cases, and
it is likely they will continue to do so, particularly in relation to
online sales. The CMA commented: “Casio’s illegal action
telling retailers not to offer their musical instruments at discounted
made it harder for customers to shop around for a better price and
meant they risked paying over the odds.”
A particular concern with online sales is the ease with which suppliers and
retailers can use software to monitor online prices in real time and ensure
widespread compliance with a pricing policy. Casio was found to have used
such software and the CMA commented that its use also meant that
“individual retailers had less incentive to discount for fear of being
caught and potentially sanctioned.”
In addition to the monitoring, retailers reported to Casio any instances of
other retailers discounting its instruments.
Companies selling online or offline should ensure that their competition
compliance programmes are robust enough and include sufficient monitoring
mechanisms (such as internal audits) to ensure that RPM, including illegal
pressuring of retailers, is identified and, as necessary, brought to an
The CMA has produced
guidance for businesses
about RPM and a short film (“What is resale price maintenance (RPM)?”) that explains what RPM looks like in practice.
Preparing for a “No-Deal” Brexit: Food and Drink Federation Calls for Exemption
The UK is due to leave the EU on 31 October 2019. Whether this will occur
with or without a deal — providing for a transitional period during which
the status quo would largely be maintained — is not known at this stage.
Companies readying themselves for Brexit need to remember that, whatever
happens, competition law in the UK will continue to apply largely the way
it does now. In addition, UK companies active in the remaining EU countries
will continue to be subject to EU competition law.
The UK Food and Drink Federation (FDF), a trade association, issued a
on 7 August 2019 which recognised the continuing application of competition
law in the UK but raised the possibility of it being temporarily suspended
in a no-deal situation to allow suppliers to work together to avoid
disruption of food and drink supplies in and into the UK. This is possible
in exceptional cases under the UK Competition Act and the power has been
used four times to date.
The FDF recognises that, without a suspension, competing suppliers would
risk fines if they coordinate on prices, allocation of supplies,
distribution or other matters, or even exchange confidential information on
Potential disruption following a no-deal Brexit is an issue many other
industries are grappling with, so UK government’s reaction to this call
from the FDF will be closely watched. However, companies considering this
issue should also consider the potential application of EU competition law
if arrangements or discussions affect trade flows within the remaining EU
countries (for example, in the case of food, supplies of fresh produce from
Spain to the UK).
Penalty for Buying Only Competing Product, Paying Competitors to Stay out of the Market
On 14 August 2019, the UK CMA announced that pharmaceutical manufacturer
Aspen had admitted to participating in a historic market-sharing agreement
involving fludrocortisone acetate tablets and offered to pay a maximum fine
of £2.1 million.
The CMA had been investigating whether, under this agreement, Aspen agreed
to pay competitors to stay out of the market in order to protect its
position as the sole supplier of fludrocortisone in the UK. That type of
activity is a clear — and serious — breach of EU and UK competition law.
The CMA also had competition concerns in relation to Aspen’s acquisition in
October 2016 of a fludrocortisone product, in circumstances where Aspen
held the only other such product authorised for sale in the UK. Aspen
offered to resolve this part of the case by way of a proposed commitment to
pay £8 million to the UK National Health Service (NHS) and ensure there
will be at least two suppliers in the market.
To fulfil the latter commitment, Aspen offered to divest the
fludrocortisone product acquired in October 2016 and reintroduce and
commercialise its other fludrocortisone product in the UK.
The compensation payment to the NHS means it does not have to launch
private court proceedings for damages, although it can still seek further
damages if it wishes to do so.
This is the first time a CMA investigation has resulted in a payment for
the NHS and is a novel way of settling a case. The CMA will now consult on
the proposals and continue to investigate the two other companies allegedly
involved in the market-sharing arrangement.
The case provides a clear message that it is dangerous for a company to
take active steps to ensure that it becomes or remains the only competitor
in a market, whether that is pharmaceuticals or anything else.
UK Merger Control: Filing Is Voluntary but Unwinding a Deal Still a Risk
The parties to a transaction which falls within the jurisdictional
provisions of the UK merger control rules are not required to seek approval
— filing is voluntary and usually contemplated only if material substantive
concerns seem likely. However, the regulator (UK CMA) can still investigate
such mergers and can order full or partial unwinding of a completed
This is an unusual situation, but in August 2019, the CMA did serve an
unwinding order on a purchaser in relation to its completed acquisition of
a business and related assets.
This followed the CMA’s imposition of its standard hold-separate
requirements on the parties, requiring them not to integrate the businesses
despite completion having taken place. The CMA, however, became concerned
that action legally taken prior to the hold-separate obligation being put
in place might prejudice its investigation of the transaction and any
ultimate remedies that might be needed to deal with substantive competition
The purchaser therefore was required to disentangle the parts of the target
business that it incorporated prior to the hold-separate coming into
effect. This includes, in particular, confidential data (including customer
data) that had been shared.
The case provides a clear reminder that, although there is no obligation to
file under UK merger control law, if a merger satisfies the jurisdictional
thresholds, the potential implications of an investigation still need to be
considered. This is the case even for relatively small transactions.
Additional European competition law news coverage can be found in our news section.
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