22 June, 2022
JD Sports and Elite Sports broke competition law by fixing the retail prices of certain branded clothing products of Rangers Football Club. The Competition and Markets Authority ("CMA"), in its provisional findings, said that all the three parties colluded to keep prices of the Glasgow football club's branded replica kits high so they could essentially pocket more money for themselves. The three parties are alleged to have colluded to ensure that the price of a Rangers shirt was not cheaper at JD Sports than in Elite's Gers Online store.
The CMA claims that Rangers FC became concerned that at the start of the 2018/19 football season, JD Sports were selling the Rangers replica top at a lower price than Elite, which was seen at the time as the club's so-called retail partner. They then conspired for JD to increase the price of the Rangers replica top by nearly 10 per cent, from £55 to £60 which would then bring it in line with Gers Online prices, according to the CMA. The CMA also believes that Elite and JD, worked together to fix the prices of Rangers-branded clothing, including training wear and replica kit, over a longer period of time. The brands also aligned the amount and timing of discounts towards the end of the football season in 2019, to protect their profit margins at the expense of the fans.
The CMA advised that Elite and JD applied for leniency during the regulatory probe and confessed to cartel activity. If both continue to cooperate with the investigation, each will get a reduction on any financial penalties the regulator might decide to impose however, it is noted that JD Sports have set aside £2million in its financial statement for any potential fine and legal costs that come forth. Any businesses found to have broken competition law can be fined up to 10 per cent of their annual turnover.
Vertical agreements are agreements made between two or more parties which are operating at different levels of the production, supply and distribution chain for the purposes of that agreement. For example, in this case between the manufacturer (Elite) and a supplier or between a supplier and a retailer (i.e. JD Sports). The parties only need to be operating at different levels of the chain for the purposes of the agreement, that is, the parties could ordinarily be competitors but provided that they are acting at different levels in respect of the arrangement in question, it will be deemed a vertical agreement.
As the Competition Act prohibits agreements and arrangements between businesses that restrict competition in the UK, an agreement can be exempt from that prohibition if it creates sufficient benefits to outweigh any anti-competitive effects. The purpose of this exemption is to ensure that businesses are not prevented or disincentivised from entering into agreements that the CMA considers to be beneficial and anticompetitive. This will exempt agreements between manufacturers and suppliers provided their agreements do not contain price-fixing and other hardcore restrictions.
If the agreement does, however, include a hardcore restriction (for example, one regarding price fixing), the benefit of the vertical agreement block exemption will be lost in respect of the entire agreement. The exemption for vertical agreements does not apply to any vertical agreements which directly or indirectly (whether on its own or in combination with other factors under the control of the parties) has the object of restricting a buyer's ability to determine its sale price.
It is vitally important to ensure any vertical agreements in place are carefully constructed to ensure that they do not fall foul of the vertical agreement block exemption and CMA action. Our Commercial team at Forbes Solicitors are specialists in drafting and reviewing vertical agreements.
For more information contact John Pickervance in our Commercial department via email or phone on 0333 207 1134. Alternatively send any question through to Forbes Solicitors via our online Contact Form.
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