CMA Reminds Businesses About Competition Law

The Competition and Markets Authority (CMA) has reminded businesses that it can be illegal for suppliers to restrict their retailers’ prices.

Resale Price Maintenance (RPM) occurs when a supplier and a retailer agree that the retailer will not resell or advertise the supplier’s products below a specified price. RPM can also be achieved indirectly, for example as a result of restrictions on discounting or where there are threats or financial incentives to sell at a particular price.

Merely setting a ‘recommended’ retail price is not, however, against the law, provided that there are no attempts to enforce compliance. RPM agreements are usually illegal as they can prevent retailers from being able to offer lower prices to attract customers, or to sell off surplus stock.

This is a particularly important issue as online sales channels develop, with restrictions on discounting for internet sales capable of being illegal RPM.

The CMA’s research shows that businesses’ understanding of RPM is low; about one-third of the businesses surveyed incorrectly thought it was legal to set the price at which other businesses can resell their product, with another 37% uncertain on the rules. Only 29% correctly responded that “it is unlawful to set the price at which others can resell your products”.

The consequences for businesses that break competition law can be very serious, including fines of up to 10% of worldwide turnover.

“The CMA is strongly focused on enforcing competition law to ensure that digital and online markets are working as they should be, across all sectors, for the benefit of consumers,” said Ann Pope, CMA Senior Director.

“The CMA is issuing this advice so that all businesses know what to look out for when dealing with the supply and retail of products, whether this is online or via traditional ‘bricks and mortar’ stores,” she added.

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