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22/01/2020

CMA fines guitar maker £4.5m for illegally preventing price discounts

Subject: Competition law

Source: Competition and Markets Authority (CMA)

The CMA has fined Fender Europe £4.5 million for breaking competition law by preventing online discounting for its guitars. The decision was directed at Fender Musical Instruments Europe Limited (a UK company) which the CMA decided was directly involved in the infringement and to Fender Musical Instruments Corporation as its parent company (a US corporation).

Guitars make up a significant part of the wider musical instrument sector which has an estimated turnover in the UK of around £440 million annually. Online sales of musical instruments have grown to around 40% of total sales, making it even more important that musicians have access to competitive prices online.

From 2013 to 2018, Fender required its guitars to be sold at or above a minimum price. During the course of its investigation, the CMA found evidence that Fender on occasion pressurised retailers to raise their online prices, after being tipped off that they were not toeing the line. The CMA also found that certain Fender employees deliberately tried to cover up their actions by recording as little as possible in writing. However the CMA uncovered emails and texts from Fender’s IT servers and mobile phones, which helped to prove the illegal behaviour.

The CMA made provisional findings on the Fender case in October 2019. The guitar manufacturer admitted breaking competition law by pursuing a policy aimed at restricting UK retailers from discounting their online prices. The company admitted acting illegally and co-operated in return for a reduced fine firm confessed under the CMA’s ‘leniency’ and ‘settlement’ procedures. The amount of the fine was discounted by 60% under the leniency procedure and by a further 20% to reflect settlement.

 

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