In September the Office of Fair Trading (OFT) began investigating a number of companies it believed were involved in a price fixing deals related to a popular range of sports bras.
The Shock Absorber sports bras, worn by Anna Kournikova, are manufactured by DB Apparel UK Limited which the OFT has accused of striking anti-competitive deals with John Lewis plc, Debenhams Retail plc and House of Fraser (Stores) Limited.
The investigation underlines the importance with which competition laws are regarded by the OFT when it comes to protecting the interests of consumers. Businesses involved in the manufacturing or resale of goods should therefore be mindful of their obligations under competition legislation.
What are the OFT’s Allegations Against the Firms?
The OFT alleged that DB Apparel UK Limited entered into a number of agreements with each of the retailers between 2008 and 2011 in order to maintain a higher price for its Shock Absorber sports bras as well as other items in that range.
DB Apparel’s sports bras accounted for nearly 15 per cent of the overall sports bra market during that period. The alleged agreements sought to prop up prices on a nationwide basis throughout the UK. It is estimated that consumers may have paid between 50p and £1.50 more for the products due to these agreements.
How do Pricing Agreements Breach the Competition Act 1988?
Chapter 1 of the Competition Act 1988 specifically prohibits agreements between undertakings, decisions by undertakings or concerted practices which prevent, distort or restrict competition. There is also similar EU legislation prohibiting these types of practices from damaging trade between EU Member States known as the Treaty on the Function of the European Union (TFEU).
The agreements that the OFT has accused DB Apparel UK Limited of entering into with the retailers sought to apply resale price maintenance to the products. This is where a minimum price is agreed between the parties in relation to those products. It is not the same as a manufacturer providing a recommended retail price which will not usually breach competition law.
Comment
The outcome of the OFT’s investigation into these firms remains to be seen but businesses operating in the manufacturing and retail sectors should be very cautious regarding competition laws. The consequences of being found in breach of competition legislation can lead to hefty fines, up to 10 per cent of annual worldwide turnover in extreme cases.
For specialist advice contact Peter Gourri today by email PGourri@rollingsons.co.uk or telephone 0207 611 4848.
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