Simon Barnes, Partner at law firm Shoosmiths.
The Office of Fair Trading’s (OFT) investigation into allegations that House of Fraser, John Lewis and Debenhams engaged in price fixing on DB Apparel UK’s Shock Absorber sports bra range should act as a reminder that all conversations with suppliers regarding retail pricing must be treated as highly sensitive.
Full details of the OFT’s investigation have yet to be made public. It is clearly troubled by communications it suspects took place between the retailers and the supplier regarding pricing. The OFT has to decide whether any rules have been broken.
But if there has been an infringement, the businesses involved face the risk of fines of up to 10% of their turnover.
The underlying legal principles in this area are very clear. In short, suppliers and retailers are not allowed to agree retail prices, however informally. Nor may suppliers put pressure on retailers to sell at, or not below, a particular price.
Suppliers can issue recommended retail prices, but these must be presented to retailers on a voluntary basis. There cannot be any threat, veiled or otherwise, that the retailer will be treated less favourably if it chooses not to follow the supplier’s recommendations.
It is a fact of life that many suppliers have a view on the appropriate retail price for their products and they may have commercial concerns about retailers who sell at different prices, particularly if they sell too cheaply. Equally, retailers may sometimes have reasons of their own for wanting to discuss pricing intentions with their suppliers.
But the fact of the matter is that any discussions between suppliers and retailers regarding retail prices present a significant risk of being unlawful. It is crucial that retailers ensure their staff understand and accept this. Otherwise, they too face the risk of unwelcome scrutiny by the OFT.