On 19 January 2017, the UK Competition and Markets Authority (CMA) announced that it had reached a settlement in the case of two cartels relating to the supply of furniture products in the UK, involving market sharing, price-fixing, bid-rigging and exchange of confidential information.
Thomas Armstrong (Timber) Ltd and Hoffman Thornwood Ltd have each admitted their involvement and agreed to pay fines totalling more than £2.8 million. This includes the maximum 20% reduction for settlement pre-statement of objections. Another business, BHK (UK) Ltd, reported its part in the cartel conduct under the CMA's leniency policy and will not be fined.
The investigation began as a criminal cartel investigation following intelligence first received via the CMA's cartels hotline. The criminal case was closed in September 2015 but the case was re-opened under the CMA's civil powers in March 2016. The CMA's decision to drop its criminal investigation may have been driven by the fact the conduct predates April 2014, when the dishonesty requirement was removed from the criminal cartel offence—the CMA may have decided it would struggle to convince a jury on dishonesty at trial.
The CMA found two illegal cartel agreements to share markets and coordinate commercial behaviour (in particular pricing practices) through bid rigging and exchange of confidential competitively sensitive information. One agreement affected the supply of drawer "wraps" (the backs and sides of drawers) for beds, office and domestic furniture between 2006 and 2008; the other affected the supply of drawer fronts for beds between 2006 and 2008, and in 2011. The CMA considers these agreements reduced customer choice and gave the appearance of competition where there was none.
On 25 January 2017 the CMA sent statements of objections (SOs) to the parties setting out its allegations. The parties now have the opportunity to comment on any factual inaccuracies or inconsistencies in the SOs before the CMA adopts its formal infringement decision.
It will be interesting to see whether customers of the parties seek damages off the back of the settlement decision. The CMA's press release notes the parties supply drawer parts to well-known furniture manufacturers such as Silentnight.
This case appears to reflect the CMA's current focus on increasing enforcement, including in cases where the fine level is relatively low. In a speech on 9 November 2016, the CMA's Executive Director Michael Grenfell promised to "do more cases, and more quickly" and to increase awareness and deterrence among small and medium-sized businesses.
We would like to acknowledge the contribution of Laura Carter, Ashurst.
If you would like to view any other articles in the Competition newsletter February 2017 please click on the links below:
