On 22 November 2016, the Competition and Markets Authority ("CMA") announced that it had opened a formal investigation into suspected anti-competitive practices in relation to the supply of auction services in the UK.
In its announcement the CMA stated that the investigation is focusing on suspected anti-competitive pricing practices, including most favoured nation ("MFN") provisions in respect of online sales potentially affecting the market for auction services in the UK. Although the CMA has not at this stage revealed the identity of the companies under investigation, according to market intelligence sources the authority is targeting a business that provides real-time online services to auction houses, in return for a commission on auction sales.
It is understood that the CMA's investigation was prompted by an allegation that the business under investigation is attempting to restrict new competitors from entering the market for online auction services through quasi exclusive deals with auction houses. The complaint pointed to MFN clauses that may have affected auction houses.
Increased Antitrust Focus on MFN Clauses
MFNs (also known as "most favoured customer", or "prudent buyer", or "non-discrimination" clauses) are contractual provisions in which the seller promises the buyer that it will not offer another buyer better terms (most often regarding pricing) than those offered to the first buyer. MFNs have recently been under increasing scrutiny by competition authorities across Europe. There have been a number of recent cases, examining the potential anti-competitive effects of MFNs in various sectors, in particular in online markets (such as hotel booking, e-books, and price comparison websites). Those cases have resulted in diverging outcomes, showing that the law on MFN clauses is complex.
The CMA will now conduct an initial investigation, during which it will gather information, with a view to deciding whether or not there has been a competition law infringement. The CMA has stated that it has not reached a view as to whether there is sufficient evidence of an infringement of competition law for it to issue a statement of objections to the business under investigation; and currently estimates that it will decide in May 2017 whether to proceed with, or to close its investigation.
Implications for auction service providers and others
In light of this investigation, there is an increased risk that the CMA may contact other auction service businesses with a view to gathering information about their commercial arrangements. It may therefore be an opportune time to review commercial agreements and practices and assess their compliance with competition law. In particular, it may be advisable to examine whether current commercial agreements or terms have unidentified MFN clauses, as very often these clauses are difficult to identify and can be overlooked by companies.
How can K&L Gates assist?
Our Antitrust, Competition and Trade Regulation team has extensive experience in auditing clients' practices and agreements to assess competition risk, including conducting internal investigations into alleged illegal agreements, advising companies on the best strategies to minimise their legal exposure, and representing clients before the authorities in investigations (both on the civil and criminal side). In addition, we regularly advise clients in a wide range of sectors on their competition law obligations specifically when applied in the online context. Please contact us on a no obligation basis to discuss how we can help.
Originally published on 28 November 2016
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