This week, for Industry Voices, we spoke to Competition Law Specialist, Marc Shrimpling. Following on from yesterday’s ‘Demystifying’ piece, the conversation focuses on how the rules governing relationships between brand owners and manufacturers, distributors and retailers have changed, how brands can change their thinking to make the most out of the opportunity that brings, and why you might think about getting elective distribution agreements in place.
What’s the background to the update to the vertical block guidance last year?
UK and EU competition regulators wanted to refresh the rules governing relationships between brand owners and manufacturers, distributors and retailers. It had been over a decade since the last review and since then there has been an explosion in e-commerce across almost all consumer-facing markets. The online retail landscape is dominated in many respects by a small number of dominant platforms, most notably Amazon, and it is increasingly difficult for traditional bricks-and-mortar retailers to compete. The new regulations and guidance sought to reflect these developments, and in particular make it easier for manufacturers to offer support to retailers with physical stores who offer consumers a great shopping experience and the opportunity to touch-and-feel premium products.
The new guidance isn’t a one-size fits all solution, so how can brands change their thinking to make the most out of the opportunity?
My recommendation to brands is to think carefully about how they want consumers to engage with, and value, their brand, and then to build, and refine, a network of distributors and retailers who share a commitment to great customer experience and upholding brand value. The new rules give brands operating in the UK and the EU much more freedom to cherry-pick retail partners who are aligned with the brands’ best interests, and also to reward those retail partners who make the biggest impact in terms of enhancing brand reputation and consumer experience.
What would you say to an MI brand that didn’t have any form of selective distribution agreement in place?
In tough economic conditions, I totally appreciate that brands may be inclined to focus on short-term income targets. However, in terms of ensuring longer-term resilience, it is often important for brands to establish themselves with distributors and retailers that they can trust to promote and display their products in the right way to generate consumer loyalty. So, once it is possible to take a longer-term strategic view, in my opinion brands should then be prioritising how they can create the best possible retail network and how they can prevent their brand image being harmed if products end up with less reputable resellers.
Without being too biased, what is the role of a Competition Law Specialist in helping manufacturers understand how to get the best out of their distribution agreements?
In my experience, the real value-add for manufacturers is understanding the wide range of options and tools that are available to define the consumer experience and to safeguard brand value. I’m always pleased when a business says to me: “You’ve actually told us things we can do to help our business grow, instead of just a list of things we can’t do”, and that’s when we know we’re doing our job properly. Of course, there are some hard “red-lines” in competition law, and we will always be clear about those, but in many cases there are legitimate ways for manufacturers to achieve their core commercial objectives through their distribution agreements.
Do you think a greater understanding of Competition Law and guidance is essential in ensuring businesses don’t attract the attention of the CMA?
Yes, absolutely. The music industry has been targeted a lot by the CMA in recent years – arguably to a disproportionate extent – and so businesses in the sector have been warned about the sorts of behaviours that will be punished severely, most notably preventing retailers from deep discounting and from selling instruments online.
Every business in the music industry that I have dealt with over the years has had nothing but good intentions and a strong desire to see the industry survive through tough economic times and to foster a love and appreciation for music. Businesses like these don’t deserve to be embroiled in long investigations and litigation, and so I’m really encouraged to see the emphasis that the MIA places on supporting its members to have legal compliance as a priority.
