£2.3m fine for illegal pricing

UK: Foster Refrigerator’s parent company, ITW, has been fined nearly £2.3m for restricting dealers from offering online discounts on commercial fridges.

The Competition and Markets Authority (CMA) issued a formal allegation against ITW in January 2016, and the business has now admitted that it engaged in resale price maintenance (RPM) in internet sales of its Foster commercial fridges from 2012 to 2014.

The fine of £2,298,820 imposed by the CMA incorporated a 10% reduction for ITW setting up a competition law training programme for its staff and a further 20% reduction for ITW’s admission and co-operation with the CMA.

RPM is vertical price-fixing in which a supplier restricts the ability of a retailer to determine the price at which it will resell the supplier’s products, for example by requiring the dealer to sell at a particular price or only above a minimum price. RPM is considered illegal because it stops dealers setting their prices independently to attract more customers. The CMA has produced guidance and a short video to help businesses understand more about RPM.

Foster Refrigerator, a division of ITW, operated a ‘minimum advertised price’ policy and threatened dealers with sanctions – including threatening to charge them higher cost prices for Foster products or stopping supply – if they advertised below that minimum price.

The CMA found that Foster’s minimum advertised price policy constituted RPM because, by restricting the price at which its goods were advertised online, it prevented dealers from deciding the resale price for those goods. The CMA found that there is a clear link between the advertised price and the resale price when goods are purchased online.

The CMA says it has has sent warning letters to 20 other businesses, including both suppliers and dealers, in the commercial catering equipment sector which it suspects may have been involved in similar internet sales practices.

“Price competition from online sales is usually intense, given the ease of searching on the internet,” commented CMA senior director Ann Pope.

“ITW’s practice of setting minimum advertised prices restricted dealers from offering discounted prices online, reducing competition across online and ‘bricks and mortar’ sales, and denying buyers the benefit of lower prices for Foster’s commercial fridges. The ultimate losers are customers of restaurants or caterers, for whom the cost of their meal could have risen.”