UK and EC Competition Laws prohibit anti-competitive agreements or practices. They were introduced to ensure healthy competition between companies, as this should both promote efficiency and protect consumers.
The most serious type of anti-competitive behaviour is price-fixing, whereby parties agree (or fix) the prices which they will charge. For these purposes, “agreements” are widely construed, and can include informal understandings and “gentlemen’s agreements” as well as written contracts. The penalties for price fixing can be severe – the UK Competition Act 1998 provides that companies can face fines of up to 10% of their annual world-wide turnover, third parties may be able to sue for recovery of financial losses which they have suffered, and as a result of the Enterprise Act 2002, individuals can now face imprisonment in the UK for up to 5 years, and/or an unlimited personal fine. Competition law is enforced by the Office of Fair Trading and the Competition Commission, as well as the European Commission.
Not every discussion or agreement relating to prices is problematic. NAMs and KAMs have regular discussions with accounts which relate to pricing, and which in many cases are of central importance to maintaining the brands you represent.
There are two key principles to remember:
- First, the retailer must remain free to determine his own selling price; and
- Second, as retailers are not permitted to fix prices between themselves, you must ensure that you do not provide them with confidential information relating to their competitors, including pricing details unless these are already in the public domain.
The following points are intended to help you understand in more detail how far you can go in your pricing discussions.
Pricing – What you can say/do
- Discussion of recommended prices (RRPs, SRPs etc) is generally fine, as long as those prices really are just recommendations and not backed up by other forms of coercion (such as threats to stop supplies if RRPs are not adhered to).
- General discussions relating to the background/make-up of your RRP are also fine – you have specialised experience of the market in which your products are sold, and are entitled to share that with the retailer, including your view of which price points may be suitable for particular products. However, you must not incentivise retailers to sell at RRP, or penalise them for not doing so.
- Discussion of general pricing in the market – this will not present problems as long as it is based on pricing data which is publicly available. Subject to any contractual confidentiality restrictions, this can include data collected by third parties research agencies, as long as it is based on data which could have been collated by anyone (e.g. current or historic actual in-store selling prices). You must never share data which you have only as a result of your relationship with a retailer – especially any information relating to future pricing policies or promotions.
- General, non-specific discussion of previous marketing programmes/offers which have been successful/unsuccessful. Ideally, you should not divulge the identity of the customer concerned; however, more importantly, you must ensure never to discuss specific details (e.g. relating to costs, margins etc) of other customers’ previous promotions or future strategies of which you are aware.
- Maximum prices – in the UK, suppliers are generally permitted to impose maximum prices, as long as retailers still have the freedom to price lower. However, if your maximum price is effectively a minimum price (because it is so low that the retailer would lose money if he discounted), then this may still amount to price fixing.
- If in doubt, remember that the retailer must always have the final say in determining his resale price (subject to any legitimate maximum you may seek to impose).
