Today the UK Competition and Markets Authority (“CMA”) announced that it has opened a new investigation into “suspected anti-competitive arrangements in the UK clothing, footwear and fashion sector”. Fashionista asked her colleague and competition law expert Dervla Broderick what this is likely to involve.

Dervla explained that the investigation is being carried out under Chapter I of the UK Competition Act 1998 (and the equivalent EU rules) which deals with cartels and other agreements which restrict competition. The announcement follows publication this week of the CMA’s Annual Plan for 2015/16 under which the CMA has committed to launch as many new competition enforcement investigations as possible, focusing in particular on civil and criminal cartel investigations.

Although there is very limited information available regarding the CMA’s latest investigation, there is speculation that it may concern anti-competitive restrictions in online retail agreements. This would follow on from recent announcement by the European Commissioner for an e-commerce sector enquiry. If this were the case, offending restrictions could include a ban preventing brands from restricting their distributors from selling legitimate product via the internet, fixing the pricing for goods sold on e-commerce websites or sharing geographic markets between competing firms.

The Chapter I prohibition is concerned with agreements, decisions and concerted practices which have as their object or effect the restriction, distortion or prevention of competition. A cartel is generally the most blatant form of competition law infringement which will almost certainly be found to have a negative effect on competition and on consumers. When firms engage in cartel activity, such as price-fixing, market-sharing, or the exchange of commercially sensitive information, they can expect large fines of up to 10% of annual turnover to be imposed.

It is possible that the CMA’s investigation has been triggered by a complaint or from whistleblowing by members of a cartel, although there has been no mention as yet of whether the CMA has conducted any dawn raids in the sector. The CMA website states that the preliminary part of the investigation will continue until October 2015. The CMA will reach a decision on whether to proceed with or close the investigation at that stage. Fashionista will be following developments, so watch this space…!

 

By: Sarah Wright
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