The Competition and Markets Authority (CMA) has alleged that Lancashire-based bathroom supplier Ultra Finishing Limited has breached competition law.
The company is said to have introduced a minimum advertised price for internet sales, which effectively limited the ability of retailers of their products to make online sales below a specified price level.
The CMA alleges that both cases were a form of resale price maintenance and infringements of competition law. Any business found to have infringed the Competition Act 1998 can be fined up to 10% of its annual worldwide group turnover.
The CMA’s findings are provisional and no final conclusion has been reached regarding whether there has been a breach of competition law.
Commercial refrigeration supplier Foster Refrigeration, a division of ITW Ltd, has also been named in the case.
Ann Pope, the CMA director responsible for the cases, said: “The internet has driven innovation in retail markets. Where ‘traditional’ businesses operating through bricks-and-mortar shops face intense price competition from online sales, suppliers may be tempted to respond by introducing practices, like minimum advertised prices, that restrict such competition.
“Retailers should be free to set their own sales prices online. This drives competition among rival retailers because they compete to attract consumers who are using the internet to shop around for the best deals.
“The CMA will carefully consider representations from the parties before reaching a final decision on whether the law has been infringed.”
The CMA’s investigation into the bathroom fittings sector began in August 2014 with a number of companies thought be under scrutiny. In calculating financial penalties, the CMA takes into account a number of factors including the seriousness of the infringement(s), turnover in the relevant market and any mitigating and/or aggravating factors.
Responding to the news, Ultra has released the following statement: “As you may know, there is an ongoing investigation by the Competition and Markets Authority into historic concerns within the bathroom fittings sector. We have been one of the companies involved in that investigation and continue to engage with the CMA in that regard.
“The CMA have decided as part of their next steps in the process to send what is called a statement of objections to Ultra. The CMA have identified some provisional competition law concerns about some aspects of historic practices. We are invited to respond to the CMA as part of the ongoing process and are fully prepared to provide that response. Ultra Finishing Limited will continue to engage in discussion with the CMA. It would not be appropriate for us to comment further at this point.
“Suffice to say that we are continuing to engage with the CMA to conclude appropriately. We will provide further information in due course.”
Commenting on the news, a senior bathroom retail analyst said he questioned why a manufacturer, which owns the intellectual rights to its ranges, shouldn’t be able to act to protect the pricing of those products.
“The fact is that the UK KBB industry needs bricks-and-mortar retailers,” he said. “They are a design and installation sector, as much as a seller of products, so the industry should at least represent the needs of bricks-and-mortar retailers to the CMA. Showrooms are critically important to our sector.
“It is very fashionable to shout about ‘the rights of the consumer’, but I don’t see how the consumers’ rights are being breached just because they have to pay £X for a specific Ultra shower. If it’s too expensive, they can always buy from an alternative manufacturer.”
The CMA’s allegations come only three months after Ultra chief executive Dave Cullen claimed the company was on the road to recovery, despite losses of more than £11 million in 2014.
The company blamed the deficit on “over-investment” in distributor Mark II, which it acquired in 2013.
Ultra subsequently placed Mark II Distribution into administration in December 2014, following the loss of its largest customer Tesco.
“The difficult decision was taken to put Mark II into administration following a closer examination of the business and the loss of its largest customer Tesco,” Cullen said at the time. “This was the first important step on the journey to get the Ultra Finishing business back on track.
“Ultra Finishing lost its way in 2014 and service levels fell as all focus went on to Mark II. However, fantastic progress has been made this year. Investment at the start of the year provided the foundations for the future and we have continued to hit our aggressive targets and consolidation plans.”