Blue Monday for electro-pop giants in price-fixing row

Keyboard and electronic drum kit makers Roland and Korg – whose sound defined the Eighties’ synth-pop of bands from New Order to A Flock of Seagulls – have been battered by the UK competition watchdog for price fixing practices as part of a major clampdown on the sector, which has already seen both Casio and Fender penalised.

The Competition & Markets Authority (CMA) issued fines totalling £5.5m to the two firms who breached competition rules by restricting online discounting of their musical instruments. The practice, known as “resale price maintenance” (RPM), forces retailers to sell instruments at or above a minimum price.

Fender was fined £4.5m in January, and Casio was hit with a £3.7m penalty last August. The move brings the total fines imposed by the CMA for this illegal conduct in the musical instrument sector to £13.7m.

Separately, a retailer of musical instruments, GAK, has also admitted to engaging in RPM with Yamaha and agreed to pay a maximum fine of more than £250,000 to settle the case. This is the first time the CMA has taken enforcement action against a retailer in a resale price maintenance case.

Building on its extensive efforts to monitor and address suspected RPM, the CMA has launched its own in-house price monitoring tool, which it says is aimed at deterring companies from entering into agreements restricting online discounting.

The CMA claims its new software will allow it to automatically monitor price levels among musical instrument retailers and enhancing its market intelligence. The watchdog insists this will benefit consumers in the long-term. The CMA intends that this tool will be used to monitor suspicious pricing activity in other sectors in the future to help protect more customers purchasing online.

Given the prevalence of RPM in the musical instrument sector, the CMA has issued an open letter to the industry warning of the illegal activity it has uncovered and urging compliance with the law.

The CMA has also written to almost 70 manufacturers and retailers across the sector, warning them about their conduct. These letters make the recipients aware that the CMA suspects their online pricing arrangements may have been illegal and that they need to take swift action to ensure they are complying with the law or potentially risk an investigation and fines. As in the case of GAK, any such fines imposed are likely to be increased if a business fails to take adequate action after a CMA warning.

CMA executive director of enforcement Michael Grenfell said: “During the coronavirus outbreak, people are shopping online more than usual, including for musical instruments. Even before the pandemic, the CMA estimated that an average of around 40% of musical instruments were sold online so it’s important that manufacturers and retailers do not illegally work together to keep prices high.

“Today’s announcements make clear the CMA’s determination to protect shoppers from illegal attempts to restrict discounting.”