Korg UK, Roland UK Fined For Breaking Competition Law

The UK’s Competition and Markets Authority has announced that it has fined Korg UK & Roland UK a total of £5.5 million, in 2 separate cases, for restricting online discounting of musical instruments.

Each of the companies was fined fined for implementing resale price maintenance (RPM), essentially setting a minimal sales price for their products. While some argue that setting a minimum retail price protects smaller bricks and mortar music stores against big online retailers, RPM is illegal in the UK.

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 fines follow earlier fines against Casio and Fender, bringing the total fines imposed by the Competition and Markets Authority (CMA) for this illegal conduct in the musical instrument sector to £13.7 million.

The CMA has also written to almost 70 manufacturers and retailers across the sector, warning them that the CMA suspects their online pricing arrangements may have been illegal and that they need to ensure they are complying with the law or potentially risk an investigation and fines. The CMA has not announced which companies it has sent warnings to. (Synthtopia has requested this information).

The CMA also issued these guidelines for manufacturers and retailers:

  • If you are a supplier:
    • You must not dictate the price at which your products are sold, either online or through other sales channels.
    • Policies that set a minimum advertised price for online sales can equate to RPM and are usually illegal.
    • You must not use or intimate the use of threats, financial incentives or take any other action, such as withholding supply or offering less favourable terms, to make retailers stick to recommended resale prices.
    • You cannot hide RPM agreements – restrictive pricing policies in business-to -business arrangements are illegal whether verbal or written. Equally you cannot try to use apparently legitimate policies (e.g. selective distribution agreements) to conceal RPM practices. You face higher fines if you do this.
    • You must take extra care if you use price monitoring software – monitoring your market position is legitimate, but you must not act on pricing information in a way that could limit your retailers’ freedom to set their own resale prices.
  • If you are a retailer:
    • You are entitled to and must set the price of the products you sell independently, whether online or through other sales channels.
    • Suppliers are not usually allowed to dictate the prices at which you sell or at which you advertise their products online.
    • If you have agreed to sell at fixed or minimum prices with your supplier, you may both be found to be breaking competition law.
    • You should not ask your supplier to influence your competitors’ prices – do not be tempted to push for consistent resale prices or to “police” RPM by reporting your competitors’ prices to your suppliers. If you instigate RPM conduct you can face higher fines and directors can risk being disqualified from managing companies.