Ultra Finishing Limited has agreed to pay a fine of £826,000 after admitting trying to stop retailers from discounting online prices.
The penalty includes a 20% settlement discount to reflect the resource savings generated by Ultra’s admissions and agreement to co-operate with the Competition and Markets Authority’s (CMA) investigation.
The CMA issued a statement of objections against Ultra in January 2016. The business has admitted that, in the years 2012 to 2014, it engaged in resale price maintenance (RPM) in respect of the internet sales of its Hudson Reed and Ultra branded products.
RPM is a form of vertical price-fixing where a supplier restricts the ability for a retailer to determine the prices at which it will resell the supplier’s products, for example by requiring the retailer to sell at a particular price or only above a minimum price. RPM is illegal because it prevents retailers from offering lower prices and setting their prices independently to attract more customers. The CMA has produced written guidance and a short video to help businesses understand more about RPM.
Ultra issued to retailers so-called ‘recommended’ retail prices for online sales. Despite being described as recommendations, which are lawful, Ultra threatened retailers with penalties for not pricing at or above the ‘recommended’ price, including charging them higher prices for products, withdrawing their rights to use Ultra’s images online, or ceasing supply. This limited the retailers’ ability to offer discounts to potential buyers.
The CMA will issue its formal infringement decision shortly.
Ann Pope, the CMA’s Senior Director responsible for the case, said:
Price competition from online sales is usually intense, given the ease of searching on the internet. Ultra’s practice of setting minimum online prices stopped retailers from offering discounted prices online, reducing competition across online and ‘bricks and mortar’ sales, and denying consumers the benefit of lower prices for Ultra’s bathroom fittings.
The CMA takes such vertical price-fixing seriously and is focused on tackling anti-competitive practices that diminish the many benefits of e-commerce.
The CMA has received complaints of potentially similar conduct by other suppliers of bathroom fittings in the UK. No decision has yet been taken on possible future investigations but we expect businesses involved in similar practices to bring them to an end as soon as possible.
Notes for editors
- The CMA is the UK’s primary competition and consumer authority. It is an independent non-ministerial government department with responsibility for carrying out investigations into mergers, markets and the regulated industries and enforcing competition and consumer law. For CMA updates, see our homepage or follow us on Twitter @CMAgovuk, Flickr and LinkedIn. Sign up to our email alerts to receive updates on Competition Act 1998 and civil cartels cases.
- A party under investigation may ask to enter into a settlement if it is prepared to admit that it has breached competition law and is willing to agree to a streamlined administrative procedure for the remainder of the investigation. In return, the CMA may agree to impose a reduced penalty on the business where settlement would achieve clear procedural efficiencies. In this case, the penalty includes a 20% settlement discount to reflect the resource savings generated by Ultra Finishing Limited’s admissions and agreement to co-operate both prior to and after the issue of the statement of objections. This is conditional upon Ultra Finishing Limited continuing to co-operate with the CMA’s investigation.
- Ultra Finishing Limited has agreed to pay a maximum total penalty of £1,032,502, to which, if it observes the terms of settlement, a settlement discount of 20% will be applied, giving a maximum penalty payable of £826,001. Ultra Finishing Group Limited, as the ultimate parent company of Ultra Finishing Limited, has agreed that it is jointly and severally liable for this penalty.
- The Chapter I prohibition of the Competition Act 1998 covers anti-competitive agreements, concerted practices and decisions by associations of undertakings which have as their object or effect the prevention, restriction or distortion of competition within the UK or a part of it and which may affect trade within the UK or a part of it. Similarly, Article 101 of the Treaty on the Functioning of the European Union (TFEU) prohibits such anti-competitive agreements, concerted practices and decisions by associations of undertakings which may affect trade between EU member states.
- The CMA has produced a series of animated videos explaining the main principles of competition law and how they affect small businesses.
- Any business found to have infringed the Competition Act 1998 could be fined up to 10% of its annual worldwide group turnover. In calculating financial penalties, the CMA takes into account a number of factors including seriousness of the infringement(s), turnover in the relevant market and any mitigating and/or aggravating factors. In addition, adjustments may then be made to reflect the specific size and financial position of the business in question.
- The CMA has not proposed imposing penalties on those retailers with whom Ultra Finishing Limited entered into the infringing agreements in this case. The CMA will apply Rule 10(2) of its Competition Act 1998 rules, according to which it may address its infringement decision to fewer than all the persons who were party to the relevant agreements.
- The CMA currently has 18 cases open under the Competition Act 1998.
- Enquiries should be directed to Simon Belgard (firstname.lastname@example.org, 020 3738 6472).