We felt that we had to re-issue the legal advice below, as we are still getting reports of businesses not being fully aware of the law in respect to selling prices:
Our music industry legal experts, Birketts helped us to compile a timely reminder document regarding EU Competition Law.
None of this should be news to any of us as Birketts have helped us to issue such guidance over many years and have spoken about this at various MIA Business Conferences.
Should you require any specialist legal advice in these matters, let us know and we will put you in touch with them.
Competition Law Advice
You need to ensure that your business’s commercial practices don’t fall foul of competition law. It’s important that your business develops a culture of compliance and that staff, at all levels, understand the kind of behaviours which could get them, the business, or both in to trouble.
Breaking competition law is a serious offence and can result in a business being fined up to 10% of its global worldwide turnover, individuals facing fines and prison sentences of up to five years; and company directors being disqualified for up to 15 years.
The following are examples of the kinds of activities that businesses may engage in which are in breach of, or indicate the likely breaching of, competition law.
- Agreeing with a competitor or supplier that you won’t target or sell products to particular customers (for example those in a specific geographic area), or that you will give inflated quotes to such customers. Note however that restrictions on retailers, against them making sales to other retailers in a selective distribution territory, who are not themselves authorised, can be lawfully imposed, as can restrictions against retailers making “active” (but not passive) sales to customers in territories where there is an exclusively appointed retailer.
- Agreeing with a competitor to sell the same or similar products at an agreed price, or that you won’t undercut each other.
- Agreeing with a competitor or supplier that you each will only sell a particular number of a certain product.
- Agreeing with a competitor or supplier that you won’t sell products at less than a minimum price, or that you’ll only discount them up to a certain amount.
- Providing to, or exchanging information with, other retailers’ suppliers or manufacturers which relate to pricing, sales volumes or customer locations.
- Agreeing with a competitor or supplier not to sell products over the internet, or agreeing not to include pricing information on the internet.
- Entering into any agreements of the type referred to above, or engaging in conduct, such as imposing penalties on, or refusing to, supply, retailers which has the effect of encouraging retailers to act as it they had entered into an agreement of the type referred to above.
- Demanding your retailers or distributors provide you with details of sales volumes, sales prices or the location of their customers.
- Agreeing with other suppliers that you will only supply your products into particular geographic areas, or to particular retailers or distributors.
- Agreeing with other suppliers that you will sell to retailers or distributors at pre-agreed prices.
- Providing to, or exchanging information with, retailers or manufacturers which relate to pricing, sales volumes or customer locations.
If the competition authorities (the Competition and Markets Authority (CMA) in the UK and the European Commission (Commission) in Europe) have grounds to suspect anti-competitive behaviour in a market place, then in order to protect and preserve evidence of such anti-competitive behaviour, they are likely to carry out simultaneous “dawn raids” on those businesses under suspicion. Any business, regardless of its size, could be under suspicion, and subject to a dawn raid.
You need to be alive to the possibility that your business could be subject to a dawn raid and you should have in place policies and procedures so you can react quickly and effectively.
What would your receptionist do if faced with a team of investigators from the CMA knocking on the door at 8am? And you are out of the country on holiday/business?
Below is a non-exhaustive list of the type of things you need to consider.
- Identify which members of staff are most likely to encounter investigators (this will probably be a receptionist). These staff will need to know the details of the people to be immediately informed, which will likely include members of senior management, legal advisors, and those with responsibility for IT systems.
- All staff should co-operate with the lawful requests of the investigators (not doing so is an offence in itself).
- Staff must be notified immediately not to shred, delete, or otherwise destroy, any documents or information whatsoever (and wheresoever held – laptops, pda’s, mobile phones etc), and steps must be immediately implemented to protect all documents and information from destruction.
- Care should be taken to identify legally privileged documents to make sure they aren’t inadvertently disclosed to investigators.
- Investigators should not be left alone in your premises, but should be accompanied by staff members at all times.
- Any staff member interviewed by the investigators should be accompanied by another staff member, and information given to the investigators should be limited to answering the specific questions raised.