Pricing – What you shouldn’t say/do
- Apply any form of pressure on the retailer to charge a specific price.
- Enter into any form of “agreement” with the retailer to charge agreed prices, or hold prices for specified periods. This will not generally apply to supplier-funded promotions, where you offer a lower buying price to help the retailer to discount, as in most cases your discounted buying price will be conditional on the retailer charging a discount price which effectively operates as a maximum price. However, agreeing to fund a retailer’s price increase (in the hope that other retailers will subsequently also raise their prices) will almost always constitute illegal price-fixing.
- Avoid referring to shelf prices when discussing increases to input (cost) prices. Competition authorities tend to take the view that a supplier’s interest in the price of its products should end with the cost price, and the shelf price should be determined solely by the retailer. Any discussion which discusses both cost and shelf prices, particularly in the context of a cost price increase, risks an inference that the supplier is seeking to pressurise the retailer to raise its shelf prices accordingly.
- Exchange any confidential information about other retailers which you have as a result of your supply relationship with them (such as details of prices, margins, costs, future plans). You can discuss information which is available to the public (or, as with most research reports, which is based on data which anyone could have gathered – such as actual shelf-price data – if they had the time or resources). Discussing the findings of third party surveys, such as price surveys, is unlikely to raise any material competition law concerns (assuming the surveys are based on historic and, ideally, aggregated data), although you should check any confidentiality agreements with the research company which may limit the extent to which the findings can be used externally.
How to react to retailer demands
- Proof of competitors’ pricing: you can discuss publicly available information such as current/historic selling prices from, say, till receipts or independent research reports and surveys. You must not share confidential information concerning competitors’ future pricing plans.
- Don’t be bullied into giving away too much, or having no discussion at all. Pricing does not have to be an “off-limits” conversation, but you must be careful not to be drawn into discussions which go too far.
- Use competition law as a reason for not continuing a conversation with which you are uncomfortable – don’t be afraid to mention it specifically, and the consequences of infringement (as set out above). Retailers are very familiar with the competition rules, especially supermarket multiples (who are currently being investigated in general terms by the Competition Commission). Just as you do not want to infringe the competition rules, it is not in a retailer’s interests to be caught overstepping the mark.
Conclusion
Complying with the competition rules is essentially a question of common sense: if you are about to give someone some pricing information which you think they will be really interested in, or agree a deal, the details of which you would not want to put in writing, then you should step back and think again.
Macfarlanes has wide experience of competition investigations in this field, many of which could have been avoided if prompt action had been taken sooner. Remember, if in doubt, seek advice before proceeding.
