It's time to face the music for drum kit and hi-tech music equipment suppliers

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Introduction

Just two months after announcing its infringement decision against Fender (an electric guitar manufacturer) the CMA has issued “statements of objections” to Roland (a supplier of electronic drum kits) and Korg (a supplier of hi-tech music equipment) for the same reason: all three prevented – or are alleged to have prevented – on-line discounting.

The CMA has grounds to believe that Roland and Korg required online retailers to keep pricing at or above a minimum level determined by the two suppliers. After setting out its formal case in the statement of objections (which is effectively a civil prosecutorial statement), the authority will now take into account representations from both parties before reaching its final decision on whether competition law has in fact been breached in each case.

Good news for the band

As reported previously here in January 2020 and August 2019 respectively, the CMA fined Fender (electric guitars) and Casio (pianos) for pressurising retailers to keep online prices artificially high.

The CMA is particularly conscious of the fact that a large proportion of musical instruments are purchased online; approximately 40% in recent years. As a result, the authority has been paying close attention to online distribution practices in this industry with Ann Pope the CMA senior Director of Antitrust commenting that: “It doesn’t matter whether electronic musical instruments and kit are being purchased by a world-renowned DJ or a music enthusiast setting up a home-studio – everyone should be able [to] buy at the best prices.

Big Brother is watching you

Another trend to emerge is the use of automatic pricing algorithms to monitor prices set by retailers across online markets. The CMA alleges that Roland and Korg subscribed to such services giving them a ‘Big Brother’ view of online prices and making it easier for them to exert unlawful pressure on their retailers to keep prices up.

This is not the first case where the CMA has grappled with new monitoring tools. In 2016 two online poster suppliers used a similar strategy in relying on an automated repricing software to facilitate an agreement not to undercut each other’s prices. That led to fines and a 5 year director disqualification order for one of the parties (for more details, see our team’s previous law now here).

Comments

This announcement is yet another reminder that the CMA will not tolerate online minimum pricing limits, which are seen as hard-core restrictions of competition law. However, it also raises interesting questions on the extent to which businesses should be allowed to use artificial intelligence and algorithmic tools to keep track of online sales. The increasing sophistication and availability of these tools is likely to create new investigation and enforcement challenges for the CMA. There are obviously many efficiency benefits to using them and drawing the line between legitimate and illegitimate use is a key area to watch in competition enforcement.

Meanwhile, the musical instrument cases are good news for anyone wanting to start a band. Consumers should now be able to find discounted online prices for an increasing range of instruments. That said, your neighbours may not be so delighted about your new musical hobby during lockdown…!