Black Friday and Cyber Monday: competition in action or a regulatory headache?

Written on 16 Nov 2018

In recent years, Black Friday and Cyber Monday have become firmly established with UK consumers as major retail events. This year, average spend per consumer is expected to grow further, with shoppers forecast to spend £10.4 billion in the week of Black Friday, an increase of more than 3% on the same period last year as the phenomena of these shopping days once again sweeps over from the Atlantic on Friday 23 and Monday 26 November. This unofficial start of the Christmas shopping season coincides with the days immediately after the Thanksgiving holiday in the United States.

An opportunity…

Retailers, and online retailers in particular, increasingly treat this time as a prime opportunity to steal a march on their rivals with a host of attractive short-term discounts and price promotions.

Amid the shopping frenzy, manufacturers and suppliers are understandably keen to ensure that their products remain well positioned. This often means encouraging and incentivising retailers to drive volumes during this period, buying into the deep-discounting spirit of the day. In contrast, other suppliers will be concerned to protect their brand image and instinctively oppose their reputation for premium quality being jeopardised by retailers looking to make headlines.

But don’t fall foul of competition law

As the battle for control over brand positioning and retail pricing intensifies, all sides should bear in mind that competition law places clear limits on the extent to which retailers’ freedom to set retail prices may be fettered. In short, manufacturers may not impose fixed or minimum resale prices, nor can they limit the level of discount offered by retailers on particular products. Retailers may be obliged to comply with qualitative criteria that exist to protect brand image, but these cannot be used to force retailers into pricing at certain levels.

Freedom to sell online

Moreover, retailers must remain free at all times to sell online. Manufacturers may not discriminate against retailers for making online, rather than in-store, sales. The legal risks are heightened at this time in the EU due to the European Commission’s continuing focus on the e-commerce sector, having published the results of its enquiry into e-commerce last year (read more here). The results identify restrictions on retailers’ pricing freedom as a potentially anti-competitive risk area.

Additionally, it is clear that attempts to restrict a retailer’s ability to sell online will not be tolerated in all but the most exceptional circumstances. While a limited ban on platforms within a selective distribution network may be justified by a manufacturer on the grounds of brand protection (read more here), it is clear that brand protection will not be seen as adequate justification for an absolute online sales ban (read more here).

Given the severe penalties that exist for breaching competition law, manufacturers and retailers are advised to speak to a competition law expert if they have any concerns about retail pricing, particularly in the context of online sales.