On 23 March 2022, the Competition and Markets Authority (CMA) imposed a fine of £1.5m on Dar Lighting Ltd for engaging in resale price maintenance (RPM) and whilst the quantum is not significant, it constitutes more than 5% of Dar’s worldwide turnover. As Dar’s fine was reduced by 20%, following a settlement with the CMA, the total fine would otherwise have amounted to almost £1.9m, or 6% of total turnover.
However, the fine could have been significantly lower, had Dar taken note of the CMA’s warning letters regarding RPM that were issued to Dar prior to the current case of RPM. The failure to do so resulted in the CMA increasing the fine by 35%, which is the highest uplift of this kind to date. As clarified in the CMA’s new fining guidelines of December 2021, the “failure to comply with competition law following receipt of a warning or advisory letter in respect of the same or similar conduct” is regarded as an aggravating factor warranting an increase of a fine. Whilst the warning letters to Dar were issued in 2012 and 2017, the CMA considered Dar should have taken further adequate steps to comply with the CMA’s prior warnings.
The decision against Dar is one of many by the CMA in recent years to tackle RPM and the level of fine also demonstrates how serious a competition law breach it regards RPM to be.
The decision also comes at a time when both the CMA and the European Commission have recently concluded consultations and proposals on Vertical Agreements Block Exemptions. Whilst these indicated that businesses will have more flexibility in designing distribution systems and restrict online sales in recognition of the ever evolving e-commerce landscape (see report here), RPM is still seen as a ‘hardcore’ restriction.
Dar used selective distribution agreements, which the CMA stressed do not usually lead to competition concerns, but the CMA indicated such agreements “can make it easier for suppliers to control pricing or carry out RPM” and “suppliers must take particular care to ensure that they are not used or implemented in a way which breaches competition law”. In this case, Dar infringed competition law by giving the retailers the impression that the agreements prevented them from offering online discounts.
The case thus serves as a timely warning to suppliers not to take selective distribution too far and cross the red line of RPM.