Competition law is a series of rules and regulations that seek to maintain fair competition in an open market and regulate anti-competitive conduct by companies. One of the key aspects of competition law is price fixing. This is an illegal activity that can result in huge fines, criminal convictions and imprisonment.

What is price fixing?
Price-fixing is agreeing with a competitor what price customers will be charged. It can also include agreements not to sell something below a minimum price or agreeing not to undercut a competitor. Price-fixing leads to inflated prices and customers being overcharged.

Who is covered by price fixing regulations?
Competition law applies to online markets as well as traditional sellers. It also applies equally to small businesses as well as large ones.

Discussing prices with competitors
You must not discuss the prices you’re going to charge your customers with your competitors. You’ll be breaking the law if you agree with another business:

• To charge the same prices to your customers;
• To offer discounts or increase your prices at the same time; and/or
• To charge the same fees to intermediaries, e.g. retailers selling your products.

Resale price maintenance
Resale price maintenance (RPM) is where a supplier and a retailer agree that the retailer will not resell the supplier’s products for less than a set price. This does not include recommended resale prices (RRP), as long as the retailer can still resell at a price it wants and there are no threats or incentives.

RPM is often indirect. A supplier may impose restrictions on how far its product can be discounted, impose so-called ‘minimum advertised price policies’ or make threats if a certain price is not maintained. Do not agree with suppliers to fixed or minimum retail prices and do not exert pressure for distributors to adhere to a minimum price.

Price announcements
Unilateral price announcements could amount to a breach of competition law where competitor responses to those announcements demonstrate evidence of a strategy for coordinating prices or behaviour. Generic price announcement letters are generally not allowed. This stems from an investigation into the cement industry in 2012 where the Competition Commission (forerunner to the Competition and Markets Authority) found that price announcement letters could serve anti-competitive purposes by signalling the desired direction of prices and softening customer resistance. Instead, price announcement letters must be specific and relevant to the customer receiving it. To avoid falling foul of price announcements:

• Don’t announce future price changes earlier than required or before commercially necessary, generally more than 31 days before the implementation of the new prices;
• Avoid announcements of price changes that are not final:
• Ensure price increases are fully transparent;
• Do not make public statements which refer to competitors or indicate prices are contingent on them;
• Set out the last unit price paid and the new unit price; and
• Be specific in the details of other charges that apply to the customer.

Examples of high-profile price fixing scandals
Large businesses are not immune to competition law and, over the past six months, millions in fines have been handed out to companies for price fixing. Here are some of the highest-profile price fixing scandals:

• Four electronics manufacturers, including Asus and Phillips, were fined a total of EUR 111 million euros for imposing fixed or minimum resale prices on their online retailers.
• Bumble Bee Foods CEO Christopher Lischewski charged for his role in the alleged US conspiracy to fix the price of packaged seafood.
• CMA published a study into pricing algorithms and whether they could be used to support illegal practices.

This article first appeared at VinciWorks.com and is reproduced with kind permission.