Dar Lighting fined after ignoring warnings on restricting discounts

In its second investigation into the lighting industry in recent years, the Competition and Markets Authority (CMA) has found that Dar Lighting - which supplies domestic lighting products - restricted retailers' freedom to set their own prices online between 2017 and 2019.

Instead, the company required retailers to sell at or above a minimum price, which prevented them from offering discounts beyond a certain level. This kind of practice, known as resale price maintenance (RPM), is illegal because it can lead to shoppers paying more for products.

Dar uses selective distribution agreements (SDAs) which allow it to make its products available to only a limited number of selected retailers that meet certain criteria. SDAs do not usually lead to competition concerns, but they can make it easier for suppliers to control pricing or carry out RPM. In this case, Dar gave retailers the impression that the terms of its SDAs prevented them from offering online discounts.

In 2 separate 'warning letters' sent prior to its investigation, the CMA warned Dar of its suspicions that the company was restricting retailers' ability to discount products - and that this would amount to illegal RPM. The CMA requested that Dar check it was not breaking the law in this way. Dar did not take adequate steps to comply with the CMA's warnings and has now been fined, with the CMA applying a 35% increase as part of the fine calculation for failing to act on these warnings.

Separately, having admitted to acting illegally and having co-operated with the CMA's investigation, Dar's fine was discounted by 20% under the CMA's settlement procedure.

Ann Pope, Senior Director of Antitrust at the CMA, said:

Selective distribution agreements are a legitimate way for suppliers to choose the retailers they want to stock their products - but suppliers must take particular care to ensure that they are not used or implemented in a way which breaches competition law.

Dar Lighting gave retailers the impression that the terms of these agreements allowed it to prevent discounting online, which was not the case. By doing so, Dar was able to stop price reductions, meaning that shoppers lost out on the possibility of better deals.

Dar ignored not one but two warnings and is now paying the price for its failings. The CMA will take action against firms who refuse to play by the rules, particularly where they have been previously warned.

The CMA has issued millions of pounds worth of fines in recent years to firms including in the lighting and musical instrument sectors for preventing retailers from offering discounts online.

For businesses wanting to know more about RPM, the CMA has published guidance to help suppliers and retailers across all sectors, with information about what to do if they are, or may have been, involved in RPM or similar practices.

Businesses can also

Notes

1. The Chapter I prohibition of the Competition Act 1998 prohibits anti-competitive agreements, concerted practices and decisions by associations of undertakings which have as their object or effect the prevention, restriction or distortion of competition within the UK or a part of it and which may affect trade within the UK or a part of it.
2. In December 2021, the CMA issued a Statement of Objections to Dar Lighting Ltd stating that the CMA considered Dar was directly involved in the alleged infringements and to Castlegate 624 Ltd as its parent company.
3. The Decision is addressed to Dar Lighting Ltd which was directly involved in the infringement, and to Castlegate 624 Ltd as its parent company. The amount of the fine was discounted by 20% under the CMA's settlement procedure. Under the CMA's settlement procedure, a company admits to acting illegally and co-operates in return for a reduced fine, which helps make the CMA's investigation more efficient.
4. The CMA has not addressed the Decision to any retailer in this case. This is because the CMA has applied Rule 10(2) of its 1998 Rules, according to which it may address a proposed infringement decision to fewer than all the persons who are or were party to the relevant agreement/s.
5. The CMA has applied uplifts to the fine imposed on Dar for failing to take sufficient action after 2 warning letters and for having breached competition law intentionally. The 35% increase imposed by the CMA as part of the fine calculation for failing to take sufficient action after the 2 warning letters is the highest uplift of this kind to date.
6. In 2012, one of the CMA's predecessors, the Office of Fair Trading, sent a warning letter to Dar about potential RPM. In 2017, the CMA sent a further warning letter to Dar concerning potential RPM.
7. Since 2019, the CMA has fined 5 musical instrument companies for online RPM in the following sectors: Digital pianos, digital keyboards and guitars; Synthesizers and hi-tech equipment; Electronic drum sector; guitar sector; and digital pianos and digital keyboards sector.
8. Digital pianos, digital keyboards and guitars was the only case so far where the CMA took enforcement action against a retailer in a resale price maintenance case. The CMA imposed a penalty on the retailer. The amount of the fine was increased by 15% after it emerged the activity appeared to have continued after the retailer received an advisory letter from the CMA, making it aware that there was evidence suggesting it might be engaging in RPM.
9. The CMA has also fined 3 companies in other sectors for RPM: 1 in the light fittings sector; 1 in the bathroom fittings sector; and 1 in the commercial refrigeration sector.
10. In a report commissioned by the CMA, economic consultancy DotEcon found that the CMA's decisions condemning RPM in the bathroom fittings sector and the light fittings sector (see note 9) had led to an estimated fall in prices of around 17%.
11. Following the musical instrument decisions (see above), to help the musical instruments industry learn the lessons from the CMA's investigations the CMA published an open letter to suppliers and retailers in the musical instruments sector and case studies relating to its Casio investigation, Korg investigation and Yamaha/GAK investigation. It also issued a large number of warning letters, which signpost to guidance for businesses on resale price maintenance and encourage musical instrument suppliers, and retailers, to review their business practices to ensure they are complying with competition law. In addition, building on its extensive efforts to monitor and address suspected RPM, the CMA launched its own in-house price monitoring tool aimed at deterring companies from entering into agreements restricting online discounting.