The CMA has today issued a decision that Ultra Finishing Ltd broke competition law by preventing retailers from discounting online prices.
The decision imposes a fine on Ultra of £786,668 and brings the current investigation to a close.
Last month, Ultra admitted breaking competition law and agreed to pay a fine. The Competition and Markets Authority (CMA) announced then that it would apply a discount of 20% from the fine in recognition of efficiencies resulting from Ultra admitting its infringement under settlement.
Ultra has now agreed to set up a programme to help ensure compliance with competition law within its business and among its staff. This includes a clear commitment to competition law compliance by the Ultra Board, including an external statement to that effect, which has been published on Ultra’s website. The company will also roll out tailored compliance training for all employees, and has put in place a detailed procedure to identify, assess and mitigate competition law risks. Ultra will review the compliance programme on an annual basis and submit a report on its compliance activities to the CMA each year for the next three years.
In recognition of this positive step, and in line with CMA guidance, the CMA has now applied a 5% discount from the original fine, which would have been £1,032,502. Applying the discount for the compliance programme and then the discount for the settlement, the fine will now be £786,668.
The fine is for Ultra’s infringement of competition law by way of engaging, in the years 2012 to 2014, in resale price maintenance (RPM) in respect of the internet sales of its Hudson Reed and Ultra branded products. RPM constitutes vertical price-fixing where a supplier restricts the ability of a retailer to set 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.
In addition, the CMA has today sent warning letters to a number of other suppliers of bathroom fittings that it suspects have engaged in similar practices in relation to internet sales, and the CMA expects to issue more warning letters in the future. A warning letter does not amount to a finding as to whether or not a company has infringed competition law. However, if necessary, the CMA will also initiate further enforcement proceedings against companies which participate in RPM.
The CMA is working with a number of industry bodies to help publicise the lessons to be learned from this case and to encourage best practice.
Although the CMA has decided in this case to impose a fine only on the supplier, retailers should be aware that they can also be fined for entering into RPM agreements with suppliers. If a business thinks that it may have been involved in RPM, then it may be able to apply for leniency and receive a reduced fine, or avoid a fine altogether, by reporting it and cooperating with the CMA.
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.
- The non-confidential decision will be published on the case page in due course following the redaction of commercially sensitive information.
- 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.
- Appropriate compliance activities are one of the mitigating factors which may merit a reduction in penalty. The CMA considers it is key that an appropriate compliance culture is instilled in an organisation, from the top down. The CMA recommends that businesses use a four-step process to tackle the specific risks they face: risk identification, risk assessment, risk mitigation and review. See our Competition law compliance: guidance for businesses collection for further details.
- Ultra Finishing Group Limited, as the ultimate parent company of Ultra Finishing Limited, is jointly and severally liable for the penalty. The CMA has not imposed penalties on those retailers with whom Ultra Finishing Limited entered into the infringing agreements in this case. The CMA has applied 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 has produced a series of animated videos explaining the main principles of competition law and how they affect small businesses.
- The CMA may send warning or advisory letters to businesses where it has concerns that they may be harming competition in their market sector. Receiving a warning letter does not mean that a company has broken the law. See ‘Warning and advisory letters: essential information for businesses’ for further information.
- Any businesses that have concerns about RPM or other anti-competitive behaviour can contact the CMA through an online form or by phone (020 3738 6000). If you have been involved, you may even benefit from lenient treatment by coming forward to the CMA. See the CMA’s website for more information about how to apply for leniency as well as leniency benefits, eligibility and conditions.
- The CMA currently has 18 cases open under the Competition Act 1998.
- Enquiries should be directed to Simon Belgard (email@example.com, 020 3738 6472).