Swift Electrical’s commercial director Malcolm Scott gives his views on the CMA’s ruling against Ultra Finishing
When I was asked for my opinion on the recent case where Ultra was fined £786,668 by the Competition and Markets Authority, it felt rather like being asked to comment on the recent election for Mayor of London – complete with howling errors by people who should have known better.
The press release from the CMA explains that it is illegal for a supplier to determine the price at which a retailer resells their products, concluding that since Ultra openly admitted activity that was ‘reducing competition across online and bricks and mortar sales denying consumers the benefit of lower prices’, it had broken the law.
So, while this particular investigation was specific to internet retailers, the case, and the point in law, was not specifically about the internet. Had Ultra chosen to adopt a similar strategy with the DIY channel or the bathroom studio retailer, the verdict would have been the same.
Manufacturers are expressly forbidden, by law, from attempting to set retail prices, except where they operate their own retail business and become a retailer. I think I can speak for my retail colleagues at the KBSA and say that as business owners and managers, no retailer would accept a supplier telling them what prices to charge their customers. Every business is different and must be allowed to set its own individual prices in line with its operating costs.
On the more general issue of online sales and how they affect traditional high-street retailing, there is quite a lot of nonsense talked by people on both sides of the fence who should know better. I do smile when a retailer who operates from a showroom that has only two brands on display – which they are clearly displaying very well, and selling at a good profit – complains that they cannot compete on a different brand or an entry-level budget washing machine. These may be the mainstay products for the opposing internet trader, or multiple retailer with hundreds of branches, who holds large stocks and sells the item every day of the week.
Those kitchen and bathroom showrooms that actually specialise in a focused offering have very few problems with the internet. On the other side of the fence, I smile when I read articles like the recent AO.com article that gave reams of percentages and numbers, obscuring the simple question that every business must start by asking – was there any profit? In the good old days, a business simply had, or had not, made a profit.
The practice of manufacturers supporting those retailers who invest in their business and who provide a clear platform to enable consumers to gain access to products should and will continue.
The giving of different levels of support to different types of retailers in recognition of the different platforms that each type of retailer work from, is completely legal and is not affected by the Ultra case.
It is illegal to attempt to set retailer prices, but it is perfectly legal to set clear and objective criteria that, once met, any retailer can benefit from.
The ‘screams and shouts’ about favourable terms and unfair support for showrooms regularly heard from some internet dealers and from electrical retailers should never stop manufacturers supporting any displaying outlet that has a high-quality showroom and a team of highly trained staff.
The financial support in terms of free software, free image banks and contributions toward high-quality reference page set-up for internet retailers who do a good job should also continue.
Different, but appropriate, support is quite proper and legal. Price fixing is not!