Guitars make up a significant part of the wider musical instrument sector which has an estimated turnover in the UK of around £440 million annually. Online sales of musical instruments have grown to around 40% of total sales, making it even more important that musicians have access to competitive prices online.
Today’s move follows the Competition and Markets Authority’s (CMA) provisional findings on the Fender case in October 2019. The guitar manufacturer has admitted breaking competition law by pursuing a policy aimed at restricting UK retailers from discounting their online prices. The firm confessed under the CMA’s ‘leniency’ and ‘settlement’ procedures. Under these, a company admits acting illegally and co-operates in return for a reduced fine, which helps make the CMA’s investigation more efficient.
From 2013 to 2018, Fender required its guitars to be sold at or above a minimum price. This kind of illegal practice, known as resale price maintenance, often leads to customers missing out on the best deals because, even when they shop around, they find all retailers tend to be selling at a similar price.
During the course of its investigation, the CMA found evidence that Fender on occasion pressurised retailers to raise their online prices, after being tipped off that they were not toeing the line.
Exploring the case further, the CMA also found that certain Fender employees deliberately tried to cover up their actions by recording as little as possible in writing. But the investigation uncovered emails and texts from Fender’s IT servers and mobile phones, which helped to prove the illegal behaviour.
Andrea Coscelli, CMA Chief Executive, said:
It is absolutely essential that companies do not prevent people from being able to shop around to buy their products at the best possible price. This is especially important for expensive and popular items like guitars, and so Fender’s actions could have had a big impact on customers.
Quite simply, this behaviour is against the law. The fact the CMA has imposed large fines on major musical instrument firms Casio and Fender in a matter of months should be a lesson to this industry and any other company considering illegal behaviour. Break competition law and you will face serious consequences.
As a result of Fender’s illegal actions, the CMA has fined it £4.5 million, which is the largest imposed in the UK for resale price maintenance. This comes just months after the CMA fined Casio £3.7 million for similar behaviour in relation to digital pianos and keyboards.
The CMA has produced guidance for businesses about RPM so they can make sure they play by the rules and avoid fines. Businesses can also watch the CMA’s short film that explains what RPM looks like in practice.
A public version of the CMA’s final infringement decision will be published in due course.