On 31 July 2023, the Competition and Markets Authority (CMA) issued an infringement decision finding that Leicester City FC colluded with JD Sports to restrict competition in the sales of Leicester City-branded clothing, including replica kit, over the course of 2018 to 2021.
Both parties admitted the infringements, with Leicester City FC fined GBP 880,000 for its conduct (reflecting a discount of up to 20% of the fine which would otherwise have been imposed due to its participation in the CMA’s settlement procedure). JD Sports avoided a fine under the CMA’s leniency programme by reporting the breaches.
More specifically, the investigation related to market sharing and price fixing arrangements whereby JD Sports either stopped selling Leicester City-branded clothing online or altered its company-wide terms of sale such that fans were required to pay for delivery charges on the goods in question.
According to Michael Grenfell, executive director of enforcement at the CMA, this meant that “fans may have ended up paying more than they would otherwise have done”.
While the impact of this particular conduct will be largely constrained to fans of the Foxes, it has prompted the CMA to begin a sector-wide outreach programme in which it has suggested that such conduct may be wider reaching, reminding clubs of their competition law obligations.
As a reminder, any conduct which has the object or effect of restricting, preventing or distorting competition within the UK is prohibited under Chapter I of the Competition Act 1998. This includes, but is not limited to, price fixing and market sharing, with price fixing a broad concept covering directly or indirectly fixing purchase or selling prices or any other trading conditions.
The CMA’s outreach is no surprise given that just last year Rangers FC, Elite Sports and JD Sports were fined more than GBP 2 million over allegations of price-fixing in relation to Rangers FC merchandise, including replica kits. In this instance, the CMA’s investigation revealed evidence that the parties had colluded to fix retail prices.
These recent cases may suggest to the reader that these concepts are new to the sporting world. However, in 2003 the Office of Fair Trading (the predecessor of the CMA) fined some of the biggest names in sport, including Manchester United and sports kit maker Umbro, nearly GBP 19 million for artificially fixing the price of replica football strips.
Given this sectoral recidivism, football and other sporting clubs, kit manufacturers and related retailers should take stock: the CMA has warmed up and is waiting on the sidelines. Should infringements continue, it will not hesitate to take to the field of play.
In such circumstances, penalties can be significant: the maximum financial penalty the CMA can impose is 10% of global group turnover while certain infringements can also result in imprisonment and/or the disqualification of directors.
Given these potential penalties and the looming spectre of the CMA, organisations should be taking a number of practical steps to protect themselves:
- they should review their past and present commercial arrangements to ensure that these do not have the object or effect of restricting competition. Key areas to consider in this context are price fixing, which as noted above is a broad concept that can extend to fixing any element of pricing or related trading conditions, as well as market sharing;
- if potential infringements are identified, organisations should assess whether to report that conduct to the CMA, potentially availing themselves of the CMA’s leniency programme, which can offer reductions of up to 100% from CMA fines. This was the approach taken by JD Sports in the present case; and
- organisations should future-proof their businesses, delivering competition law compliance training to employees and implementing/updating compliance policies and procedures to ensure their employees avoid infringing conduct in the future. It is particularly key that management and commercial decision-makers are aware of the corporate and individual liabilities of infringing competition law.
The authors would be happy to discuss the appropriate application of such steps on the contact details above.