It's All About Context: CMA Imposes £1.5 Million on Lighting Brand for Creating an Unwelcoming Environment for Product Discounts - K&L Gates
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Dar’s Conduct
The CMA found that Dar, which operates a selective distribution system to sell its domestic lighting products, restricted its retailers’ freedom to set their own online prices and to offer discounts for the products they onsold.
More specifically, the CMA’s investigation focused on a number of terms and provisions contained in Dar’s selective distribution agreements with its resellers, as well as Dar’s branding guidelines, which contained strict instructions relating to the use of brand names and logos, product photography, typography, and brand colours on the resellers’ websites.
Although the CMA noted that these instructions “were not explicitly or directly about the price at which the products were being sold but about product presentation” and that they did not “explicitly prevent discounting,” the UK competition watchdog nonetheless found that the manner in which these instructions were communicated and enforced by Dar created a perception amongst the brand’s authorised resellers that discounts were not permitted because they were not compatible with the goals of the selective distribution system.
The CMA relied on two key types of contemporaneous evidence to establish that, in the absence of written price-fixing obligations, Dar’s practices in effect prevented its resellers from offering sales discounts to customers:
Dar’s internal communications, which showed a perception within the company itself that discounts and sales campaigns were not compatible with the spirit of Dar’s selective distribution programme, with employees reporting internally those authorised resellers who would advertise discounts; and External communications with Dar’s resellers, including via WhatsApp, which the CMA concluded gave rise to an anti-discount culture for online selling, thus creating a perception amongst authorised resellers that Dar’s selective distribution system somehow allowed the brand to prevent discounting.
For example, a Dar employee sent the following WhatsApp message to a reseller explaining why the reseller was not admitted to the selective distribution network: “To be able to control the prices customers who have [Dar brand] must have a designated area with an approved [Dar brand] display” (emphasis added).
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