On 19 April 2021, the Competition Appeal Tribunal (CAT) published its decision to dismiss the appeal by electronic drum kit manufacturer Roland in relation to the £4 million fine imposed by the Competition and Markets Authority (CMA) on Roland for resale price maintenance.
Roland did not contest that it had infringed competition law as part of its appeal to the CAT. Instead, its focus was on contesting the way the CMA had calculated its fine, namely by submitting that:
1. The starting point for fine calculation of 19% of turnover of the relevant business was too high for a case involving a vertical restriction like resale price maintenance (where a supplier imposes prices on or otherwise pressures distributors to sell at certain prices). Roland argued that the CMA normally applied such high starting points for more serious horizontal cases, i.e. those between competitors, and a more appropriate starting point would be 7% or 8% - in line with what is decided by French and Belgian competition authorities in similar cases.
Roland also argued that such a starting point was excessive in light of the nature of the infringement and that the CMA did not ensure the fine was proportionate.
2.The CMA incorrectly gave only a 20% discount to the overall fine for leniency, despite all of Roland's continued and detailed co-operation with the CMA’s investigation.
The CAT's decision
The CMA has significant discretion in how it calculates fines for competition infringements. The CAT rejected Roland's appeal on both grounds, as it concluded as follows:
- Each case is fact specific and it is not necessarily the case that resale price maintenance is automatically less serious than horizontal cases. For example, other horizontal cases with less high starting points did not involve any secrecy in the behaviours or were one-off meetings, whereas this case involved secrecy on the part of Roland employees to cover up the behaviour and the behaviour was sustained over a period of years.
- The CMA is entitled to look at the effect on the wider market and factor that into the fine, notwithstanding the fact the case only concerned one reseller. "...[A]ctive monitoring, and in particular the use of online price monitoring software....increased Roland UK’s ability to enforce [its resale price maintenance policy] and widened its likely effects....this monitoring amplified the negative impact of the infringement."
- Although Roland had applied the day after the CMA conducted its dawn raid "the speed with which a leniency application is made after the start of an investigation is not determinative of the appropriate level of the leniency discount". The focus is instead on how much value a leniency application adds and the CAT did not dispute the CMA's conclusions that Roland's leniency evidence did not provide significantly more evidence to the CMA's case than the CMA had already picked up in the dawn raid.
Roland's £4 million fine would have been higher, had Roland not agreed with the CMA that a 20% discount would be applied to the calculated fine as part of a settlement procedure, in exchange for admitting it had breached competition law and accepting a streamlined investigation process.
Part of the settlement procedure involves accepting that:
- if the settling business appeals the decision (including as to the level of the fine) it will no longer benefit from the settlement discount; and
- the CMA can then also appeal to increase the fine to pre-discount levels.
The CAT had no sympathy for Roland's argument that in settling, the CMA had already gained its benefit by way of a streamlined investigation process. The CAT stressed the settlement process is voluntary and to appeal it undermines the very efficiencies the settlement process is designed to achieve - saved resource and time. The CAT also emphasised Roland had had the benefit of legal advice throughout the proceedings. It concluded "there is no unfairness in holding Roland to its agreement that, if it chose to appeal the penalty, it would lose the benefit of the settlement discount".