Musical instrument firms to pay millions after breaking competition law

Legal | North East | Retail

The CMA has fined two musical instrument makers a total of £5.5m, in two separate cases, for breaking competition law by restricting online discounting of musical instruments.

The fines on the companies, Roland and Korg, which make, among other things, electronic drum kits and hi-tech music equipment and synthesizers, follow fines recently imposed on two other leading suppliers in the sector, Casio and Fender.

All of these companies have been fined for implementing resale price maintenance (RPM) designed to restrict retailer freedom to set prices online by requiring their musical instruments to be sold at or above a minimum price. It brings the total fines imposed by the Competition and Markets Authority (CMA) for this illegal conduct in the musical instrument sector to £13.7 million.

Separately, a retailer of musical instruments, GAK, has also admitted to engaging in RPM with Yamaha and agreed to pay a maximum fine of more than a quarter of a million pounds to settle the case. This is the first time the CMA has taken enforcement action against a retailer in a resale price maintenance case.

The CMA has today issued a provisional decision finding in this case that GAK and Yamaha agreed that GAK would not discount the online price of certain Yamaha musical instruments below a minimum price. The amount of the fine was increased by 15% after it emerged the activity appeared to have continued after GAK received an advisory letter from the CMA, making it aware that there was evidence suggesting it might be engaging in RPM. In contrast, Yamaha was granted total immunity from fines for being the first to bring the conduct to the attention of the CMA.

Building on its extensive efforts to monitor and address suspected RPM, the CMA has launched its own in-house price monitoring tool aimed at deterring companies from entering into agreements restricting online discounting. The new software will allow the CMA to automatically monitor price levels amongst musical instrument retailers, enhancing its market intelligence and benefitting consumers in the long-term. The CMA intends that this tool will be used to monitor suspicious pricing activity in other sectors in the future to help protect more customers purchasing online.

Given the prevalence of RPM in the musical instrument sector, the CMA has issued an open letter to the industry highlighting the illegal activity it has uncovered and urging compliance with the law.

The CMA has also written to almost 70 manufacturers and retailers across the sector, warning them about their conduct. These warning letters make the recipients aware that the CMA suspects their online pricing arrangements may have been illegal and that they need to take swift action to ensure they are complying with the law or potentially risk an investigation and fines. As in the case of GAK, any such fines imposed are likely to be increased if a business fails to take adequate action after a CMA warning.

Michael Grenfell, the CMA’s Executive Director of Enforcement, said: “During the coronavirus outbreak, people are shopping online more than usual, including for musical instruments. Even before the pandemic, the CMA estimated that an average of around 40% of musical instruments were sold online so it’s important that manufacturers and retailers do not illegally work together to keep prices high. Today’s announcements make clear the CMA’s determination to protect shoppers from illegal attempts to restrict discounting.”

Did you enjoy reading this content?  To get more great content like this subscribe to our magazine

Reader's Comments

Comments related to the current article

Leave a comment

Your email address will not be published. Required fields are marked *