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CMA consults on its approach to leniency in RPM cases

Posted on 06 August 2020

Following the recent flurry of enforcement activity in relation to resale price maintenance (RPM) in the musical instrument sector, the CMA launched a consultation on its approach to immunity/leniency in such cases.

The consultation

The CMA's concern is that its current guidance on applications for immunity/leniency in cartel investigations is not well-suited to RPM cases and, as a result, is impacting its ability to fine companies and achieve deterrence.

Under the current guidance, in relation to RPM cases:

  • where an applicant comes forward and provides sufficient evidence of a cartel (and the CMA does not have a pre-existing investigation into the conduct in question) the CMA must grant the applicant immunity ("Type A" immunity);
  • where the CMA is already investigating the conduct in question, the first applicant to report and provide evidence of a cartel may be granted immunity or up to a 100% discount on any fine ("Type B" leniency); and
  • where someone has already been granted Type B leniency, or where the applicant has coerced another undertaking to participate in the cartel activity, the CMA may grant up to a 50% discount on any financial penalty ("Type C" leniency).

The CMA considers that its policy as regards Type B leniency in RPM cases has the potential to be "overly generous, limiting deterrence".

In coming to this conclusion, the CMA noted that RPM cases are, by their nature, different from other horizontal cartel cases. For example:

  • they tend not to be either as secretive or as complex;
  • where an RPM investigation has already been launched, the CMA is already likely to be in possession of good evidence of an infringement; and
  • there are only ever two parties to an RPM agreement – a supplier and a reseller, whereas horizontal cartel cases often involve several parties. 

As a result, the value that someone applying for Type B leniency can add in an RPM case is less than in a horizontal cartel case, and in the CMA's view, is unlikely to be sufficient to justify immunity or a discount of up to 100% of any fine.

The CMA therefore proposes to clarify the way in which it will exercise its discretion in granting Type B leniency in RPM cases such that, in general, immunity would not be granted and reductions in fines would be no more than 50%.

The consultation closed on the 28 August 2020 and the CMA will publish the final outcome of its consultation in due course.

Recent developments

As noted above, this consultation comes off the back of the CMA's heightened enforcement activity in relation to RPM. Already this year, the CMA has imposed fines on Roland and Korg (£5.5m), Fender (£4.5m) and Casio (£3.7) in the musical instrument sector alone.

What is particularly interesting however is that the CMA has also taken its first enforcement action against a reseller over RPM leading to GAK settling with the CMA for £278,000. This is significant because resellers often consider themselves immune to such enforcement action based on the argument that RPM is forced upon them by their suppliers.

Aside from enforcement action, the CMA has also recently developed a price monitoring tool, which it will use to monitor online retail pricing and detect suspicious patterns (again with a focus on RPM).

What next?

The CMA's consultation and investment in its price monitoring tool shows that its recent enforcement action in relation to RPM is not a one-off and that this is an area that it intends to monitor closely going forwards.

Both brand owners and - importantly now - resellers therefore need to be particularly careful not to enter into agreements with unlawful restrictions on the resale price of goods. 

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