Decision of the Competition and Markets Authority Online resale price maintenance in the synthesizer and hi-tech sector 29 June 2020 © Crown copyright 2020 You may reuse this information (not including logos) free of charge in any format or medium, under the terms of the Open Government Licence. To view this licence, visit www.nationalarchives.gov.uk/doc/open-government-licence/ or write to the Information Policy Team, The National Archives, Kew, London TW9 4DU, or email: [email protected]. Confidential information in the original version of this Decision has been redacted from the published version on the public register. Redacted confidential information in the text of the published version of the Decision is denoted by []. The names of individuals mentioned in the description of the infringement in the original version of this Decision have been removed from the published version on the public register. Names have been replaced by a general descriptor of the individual's role. 1 Contents Introduction and Executive Summary .................................................................... 3 Glossary ......................................................................................................... 4 Investigation .......................................................................................................... 7 Facts ................................................................................................................... 10 Addressees of the Decision ......................................................................... 10 Synthesizer and hi-tech sector overview ...................................................... 10 Korg Pricing Policy ....................................................................................... 18 Market Definition .......................................................................................... 65 Legal Assessment ............................................................................................... 69 Introduction .................................................................................................. 69 Undertakings ................................................................................................ 70 Agreement and/or concerted practice .......................................................... 71 Object of Preventing, Restricting or Distorting Competition ....................... 126 Appreciable Restriction of Competition ...................................................... 136 Effect on Trade between EU Member States ............................................. 137 Effect on Trade within the UK .................................................................... 141 Exclusion or Exemption ............................................................................. 142 Attribution of liability ................................................................................... 144 Burden and standard of proof .................................................................... 147 The CMA’s Action ............................................................................................. 149 The CMA’s Decision .................................................................................. 149 Directions ................................................................................................... 149 Financial Penalties ..................................................................................... 149 Annex A: CMA’s review of the evidence in relation to whether Korg UK threatened to terminate [Reseller 1]’s account ................................................................. 163 Annex B: Additional, quantitative evidence concerning [Reseller 1]’s compliance with the Korg Pricing Policy ..................................................................................... 170 Annex C: Additional examples, in 2016 and 2017, of [Reseller 1] agreeing to raise its pricing to the Minimum Price on request from Korg UK ......................................... 179 2 INTRODUCTION AND EXECUTIVE SUMMARY This Decision is addressed to Korg (UK) Limited (Korg UK) and to its ultimate parent company, Korg Inc. (together, Korg). By this Decision,1 the Competition and Markets Authority (the CMA) has concluded that: a. Korg UK infringed the prohibition in section 2(1) of the Competition Act 1998 (the Act) (the Chapter I prohibition) and/or Article 101 of the Treaty on the Functioning of the European Union (the TFEU) by entering into an agreement and/or participating in a concerted practice with [Reseller 1], one of Korg UK’s MI Resellers: i. that [Reseller 1] would not advertise or sell online synthesizers and hi-tech products supplied to it by Korg UK (the Relevant Products) below a price specified by Korg UK from time to time (the Minimum Price); ii. which amounted to resale price maintenance (RPM) in respect of online sales of the Relevant Products by [Reseller 1]; and b. the agreement and/or concerted practice: i. had as its object the prevention, restriction or distortion of competition within the United Kingdom (UK) and/or between EU Member States; ii. may have affected trade within the UK and/or between EU Member States; and iii. lasted from 9 June 2015 to 17 April 2018 (the Relevant Period) (together referred to below as the Infringement). The CMA has decided to attribute Korg UK’s liability for the Infringement to Korg UK’s ultimate parent company, Korg Inc., making Korg UK and Korg Inc. (together, Korg) jointly and severally liable for the Infringement. The CMA has applied Rule 10(2) of the CMA Rules in this case and has addressed this Decision only to Korg, and not to [Reseller 1]. The CMA has decided to impose a financial penalty on Korg UK and Korg Inc. pursuant to section 36(1) of the Act. 1 The CMA hereby gives notice of its decision subject to Rule 10(1) of The Competition Act 1998 (Competition and Market Authority's Rules) Order 2014 (SI 2014/458) (the CMA Rules). 3 Glossary Term Definition [Reseller] [] [Mass Reseller] [] [Reseller] [] [Reseller] [] [Reseller] [] [Reseller] [] [Reseller] [] [Reseller] [] [Reseller 1 Employee 5] Interview conducted under section 26A of the Act on 9 December 2019 Interview with [Reseller 1 Employee 5] [Reseller] [] [Korg Senior Employee 3] Interview conducted voluntarily on 18 April 2018 with [Korg Senior First Interview Employee 3] of Korg UK [Korg Senior Employee 3] Interview conducted voluntarily on 14 June 2019 with [Korg Senior Second Interview Employee 3] of Korg UK [Korg Senior Employee 3] Interview conducted voluntarily on 3 July 2019 with [Korg Senior Third Interview Employee 3] of Korg UK [Reseller 1] [] [Reseller 1] Additional Data Data provided by [Reseller 1] detailing one sample increase, ascribed to ‘[code 44]’, in [Reseller 1]’s pricing to the Minimum Price on each of 26 additional Relevant Products (as further specified in footnote 721 of this Decision) [Reseller 1] Data Data provided by [Reseller 1] detailing prices that [Reseller 1] adopted, and prices that [Reseller 1] considered adopting, on 37 Relevant Products (as further specified in footnote 720 of this Decision) [Reseller 1] Historical Data The [Reseller 1] Data and the [Reseller 1] Additional Data, taken together [Reseller] [] [Distributor] [] [Reseller] [] [Reseller] [] [Reseller] [] [Korg Employee 8] Interview Interview conducted under section 26A of the Act on 16 December 2019 with [Korg Employee 8] at Korg UK [Reseller] [] [Reseller] [] [Reseller] [] [Reseller] [] [Korg Employee 15] Interview conducted voluntarily on 14 June 2019 with [Korg Employee 15] Interview at Korg UK 12 Resellers Twelve MI Resellers of the Relevant Products to which the CMA sent s.26 Notices on 17 April 2018, as listed at footnote 3 below Act Competition Act 1998 Agreement The agreement and/or concerted practice between Korg UK and [Reseller 1] that [Reseller 1] would not advertise or sell the Relevant Products online below the Minimum Price Article 101 TFEU Article 101 of the Treaty on the Functioning of the European Union 4 Term Definition ASM Area Sales Manager Bundle Any package, offered for sale, comprising any Korg product (including any Relevant Product) and any other product or accessory (possibly including other products or accessories from a supplier other than Korg UK) CAT Competition Appeal Tribunal Chapter I prohibition The prohibition imposed by section 2(1) of the Act CMA The Competition and Markets Authority CMA Rules The Competition Act 1998 (Competition and Markets Authority’s Rules) Order 2014 (SI 2014/58) Commission The European Commission Court of Justice The Court of Justice of the European Union (formerly the European Court of Justice) Decision This decision dated 29 June 2020 Effect on Trade Guidelines Guidelines on the effect on trade concept contained in Articles 81 and 82 of the Treaty ([2004] OJ C101/07) EU The European Union European Courts The General Court and the Court of Justice General Court The General Court of the European Union (formerly the Court of First Instance) Hasselblad Commission Decision 82/367/EEC Hasselblad (IV/25.757) [1982] OJ L161/18 IBISWorld IBISWorld Limited (Company Number: 07223190) IBISWorld Report IBISWorld Industry Report G47.591 Musical Instrument Retailers in the UK (published in either March 2019 or February 2020, as specified in each relevant footnote of this Decision) Infringement The infringement of the Chapter I prohibition and/or Article 101 TFEU regarding the Relevant Products, as specified in paragraph 1.2 above. Korg Korg Inc.