Fashion industry subject to competition law investigation

Fashion industry subject to competition law investigation

The surprise of the announcement last month by the Competition and Markets Authority of an initial investigation into suspected anti-competitive arrangements in the fashion industry which infringe UK and EU competition law was not that an investigation is now underway, but why it had taken so long.

What might be describes as “expectations” of compliance with recommended prices, territorial exclusivity, limited distribution, and non-supply to consumers through certain channels (but which in competition law are arrangements) have long been thought to operate in the industry. Similarly in the way in which selective distribution agreements are operated in practice.

So what next?

At the present time the CMA is gathering information not learnt by requesting answers from various fashion companies.  In the Autumn the CMA will announce whether it is undertaking a full scale investigation.

It can also be expected that over the next few months some companies will seek to take advantage of the CMA’s leniency programme – in effect to admit to infringements in order to limit or even avoid penalties.  Others may look to whistleblow – either:

• as the infringer, to limit penalties and draw attention to others; or
• as the “injured” party

Others will look to review their agreements and practices in order to ensure that they comply with competition law going forwards.

In either case the reason is straightforward – the UK has some of the most severe penalties for competition law infringement anywhere in the world comprising the absolute worst case scenario of:

• a fine of up to 10 per cent of worldwide turnover;
• fining and imprisonment of directors and managers;
• unenforceability of agreements;

and the possibility of damages claims by injured third parties and consumers.

Oh, and reputational damage which is not an optional add-on to any of the above!

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