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CA98 Decision Competition Act 1998 Decision of the Office of Fair Trading No. CA98/06/2003 Price-fixing of Replica Football Kit 1 August 2003 (Version for Publication) (Case CP/0871/01) SUMMARY The Office of Fair Trading has decided that a number of sportswear retailers, Manchester United plc, the Football Association Ltd and Umbro Holdings Ltd have all entered into price-fixing agreements in relation to replica football kit infringing the Chapter I prohibition contained in section 2 of the Competition Act 1998. Allsports Ltd, Blacks Leisure Group plc, JJB Sports plc, Manchester United plc, Sports Soccer Ltd, The John David Group plc and Umbro Holdings Ltd were involved in various agreements or concerted practices which fixed the prices of the top-selling adult and junior short sleeved replica football shirts manufactured by Umbro Holdings Ltd. These were the replica football shirts of the England team and Manchester United, Chelsea, Glasgow Celtic and Nottingham Forest football clubs. Some of the parties were involved with the shirts of only one or some of the teams and some for longer periods than others. The longest that any of the parties were involved was from April 2000 until August 2001. The agreements or concerted practices took effect during key selling periods after the launch of a new replica football kit and during the Euro 2000 tournament. Florence Clothiers (Scotland) Ltd (in receivership) (formerly trading as ‘Sports Connection’) and Umbro Holdings Ltd were involved in an agreement or concerted practice which fixed the prices of Glasgow Celtic’s adult and junior short sleeved replica football shirt for a short period during the spring of 2001. JJB Sports plc, Sportsetail Ltd (in administration) (formerly trading at ‘England-direct.com’), the Football Association Ltd and Umbro Holdings Ltd were Office of Fair Trading 1 involved in an agreement or concerted practice which fixed the prices of the England team adult, junior and infant replica football kit sold at England-direct.com by aligning their retail prices to the high street prices of JJB Sports plc. The agreement lasted from the early spring of 2000 until the late autumn of 2001. The Office of Fair Trading considers that agreements between undertakings that fix prices are among the most serious infringements of the Competition Act 1998. Financial penalties are therefore being imposed on all parties. However, Florence Clothiers (Scotland) Ltd (in receivership), Sportsetail Ltd (in administration) and the Football Association Ltd have each been granted leniency and the financial penalties imposed on each of them are being reduced accordingly. Confidential information contained in square brackets is indicated by [C] in the original version of this decision and has been redacted from the published version. Redactions are indicated by […] or by italic text in square brackets (e.g. [more than 10 per cent]). Factual amendments in relation to the company positions of two people have been made to paragraphs 34, 37, 139, 716 and 753 of the published version of this decision. Other minor typographical amendments have been made in paragraphs 29, 219 and 691. Additional text is contained in square brackets and is indicated by [#]. Redactions are indicated by […][#]. The original version of this decision has not been changed. Office of Fair Trading 2 CONTENTS Page I PROCEEDINGS 1. Complaint 12 2. Investigation & proceedings 13 3. Leniency 15 II BACKGROUND 1. Agreements 17 2. Parties 17 2.1 Replica Shirts Agreements 2.1.1 Allsports 2.1.2 Blacks 2.1.3 JJB 2.1.4 JD 2.1.5 MU 2.1.6 Sports Soccer 2.1.7 Umbro 2.2 Umbro/Sports Connection Celtic Agreement 2.2.1 Sports Connection 2.2.2 Umbro 2.3 England Direct Agreement 2.3.1 JJB 2.3.2 Sportsetail 2.3.3 The FA 2.3.4 Umbro 3. Products 25 3.1 Replica Football Kit 3.1.1 Shirts, shorts and socks 3.1.2 Home, away, third, goalkeeper and special edition 3.1.3 Kit launches 3.1.4 ‘Replica Kit’ and ‘Replica Shirts’ 3.1.5 Umbro licensed Replica Kit 3.2 Other Licensed Merchandise 3.3 Trade mark owners (‘Licensors’) 3.4 Manufacturers (‘Licensees’)l 3.5 Retailers 3.6 Customers 3.6.1 Fans 3.6.2 Patterns of Demand Replica Kit Other Licensed Merchandise 4. Umbro’s Supply Arrangements 34 4.1 Umbro’s Distribution Policy & Supplies to Supermarkets 4.1.1 The distribution policy 4.1.2 Supplies to supermarkets 4.1.3 Conclusion 4.2 MU’s concerns to maintain the retail prices of its Replica Kit Conclusion 4.3 Embargos & Launch Protocols Office of Fair Trading 3 Conclusion 4.4 Recommended Retail Prices 4.4.1 Retail and wholesale prices Conclusion 4.4.2 Retail mark-up & margins Conclusion 5. Activity in the retailing of Replica Kit prior to 1 March 2000 49 5.1 JJB 5.2 Sports Soccer & Debenhams 5.3 Allsports & Blacks 5.4 Umbro III FACTS 1. Replica Shirts Agreements 54 April 2000 May 2000 June 2000 July 2000 August 2000 September 2000 October 2000 November 2000 December 2000 February 2001 March 2001 April 2001 May 2001 June 2001 July 2001 August 2001 September 2001 Purchase order forms and correspondence about invoices 2. Umbro/Sports Connection Celtic Agreement 94 March 2001 April 2001 June 2001 3. England Direct Agreements 96 FA/Sportsetail Agreement FA/Sportsetail/Umbro/JJB Agreement November 1999 February 2000 March 2000 June 2000 September 2000 January 2001 February 2001 March 2001 June 2001 August 2001 November 2001 Office of Fair Trading 4 IV LEGAL ASSESSMENT 1. Section 2(1) of the Act 111 2. Relevant market 111 3. The Parties as Undertakings 111 4. Relevant case law in relation to agreements and concerted 112 practices 4.1 Agreements 4.2 Concerted practices 4.3 Single infringement where acts are in pursuit of a common plan 4.4 Other legal issues relating to agreements and concerted practices 5 Replica Shirts Agreements 116 5.1 Overview of Agreements 5.2 Overview of key evidence relied on by the OFT 5.2.1 Contemporaneous documents & pricing data Views of the Parties Conclusion of the OFT 5.2.2 Other evidence Views of the Parties Conclusion of the OFT 6. Participation in the Replica Shirts Agreements of Umbro, MU and 121 the relevant retailers 6.1 Agreement between at least Umbro and Sports Soccer with respect to major Umbro licensed Replica Shirts 6.1.1 April 2000 agreement 6.1.2 May 2000 agreement 6.1.3 England Euro 2000 agreement 6.1.4 Fax from Umbro to MU retailers’ pricing behaviour 6.1.5 8 June MU home Replica Shirt agreement 6.1.6 July 2000 agreements 6.1.7 Further agreements, and meetings in relation to agreements, between Umbro and Sports Soccer in late 2000 and 2001 6.1.8 Views of the Parties Celtic, Chelsea and Nottingham Forest Replica Shirts England Replica Shirts MU Replica Shirts 6.1.9 Conclusion of the OFT 6.2 Agreement between Allsports, Blacks, JJB and JD, as well as Sports Soccer and Umbro, with respect to England Replica Shirts around the time of the Euro 2000 tournament 6.2.1 Views of the Parties 6.2.2 Conclusion of the OFT 6.3 Agreement between at least Allsports, Blacks, JJB and MU, as well as Sports Soccer and Umbro, with respect to MU home Replica Shirts in 2000 6.3.1 MU & Umbro 6.3.2 Allsports, Blacks & JJB 6.3.3 Views of the Parties Office of Fair Trading 5 6.3.4 Conclusion of the OFT Restriction of Competition for SOA 6.4 Agreement between at least JJB, Sports Soccer and Umbro with respect to England and MU Replica Shirts for the remainder of 2000 and 2001 6.4.1 Views of the Parties 6.4.2 Conclusion of the OFT 6.5 Restriction of competition for the Replica Shirts Agreements 7. Umbro/Sports Connection Celtic Agreement 170 7.1 Views of the Parties 7.2 Conclusion of the OFT 7.3 Restriction of Competition for Umbro/Sports Connection Celtic Agreement 8. England Direct Agreements 171 8.1 FA/Sportsetail Agreement 8.1.1 Views of the Parties 8.1.2 Conclusion of the OFT 8.2 FA/Sportsetail/Umbro/JJB Agreement 8.2.1 Sportsetail & the FA 8.2.2 JJB & Umbro 8.2.3 Views of the Parties 8.2.4 Conclusion of the OFT 8.3 Restriction of Competition for England Direct Agreement 9. Effect on trade for all agreements 178 10. Conclusion for all agreements 178 V Penalties 1. Legal Background 180 2. Relevant market – Replica Kit 181 2.1 Product Market 2.1.1 Demand side substitutability Fans National and Club Teams Other licensed merchandise 2.1.2 Supply side substitutability 2.1.3 Views of the Parties 2.1.4 Conclusion of the OFT 2.2 Geographic Market 3. Relevant market – Intellectual Property Licences for Replica Kit 186 3.1 Product Market 3.1.1 Demand side substitutability Other clubs or teams Other licensed merchandise Each product comprising replica kit 3.1.2 Supply side substitutability 3.2 Geographic Market 3.3 Views of the Parties 3.4 Conclusion of the OFT 4. Umbro 189 4.1 Intentional or Negligent Infringement 4.2 Step 1 – Starting Point Office of Fair Trading 6 4.2.1 Type of infringement 4.2.2 Nature of product 4.2.3 Structure of market 4.2.4 Market share of undertaking involved & entry conditions 4.2.5 Effect on competitors and third parties 4.2.6 Damage caused to consumers 4.2.7 Conclusion 4.3 Step 2 – Adjustment for Duration 4.4 Step 3 – Adjustment for Other Factors 4.5 Step 4 – Adjustment for Further Aggravating and Mitigating Factors 4.5.1 Aggravation 4.5.2 Mitigation 4.5.3 Conclusion 4.6 Step 5 – Adjustment to prevent maximum penalty being exceeded and to avoid double jeopardy 5.
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