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Fender fined £4.5 million for illegally preventing online price discounts

(Image credit: Future)

The UK's Competition and Markets Authority has fined Fender Europe £4.5 million for breaking competition law by preventing online retailers from discounting its guitars.

From 2013 to 2018, the CMA reports that Fender required its guitars to be sold at or above a minimum price. This is an illegal practice, also known as resale price maintenance.

During the course of its investigation, the CMA found evidence that Fender on occasion "pressurized retailers to raise their online prices, after being tipped off that they were not toeing the line."

Further evidence showed that Fender employees deliberately tried to cover up their actions by "recording as little as possible in writing". The CMA reports that it found emails and texts from Fender's IT servers and mobile phones, which helped to prove the illegal behavior.

Fender admitted to the illegal practice, leading to a reduced fine under the CMA's 'leniency' and 'settlement' procedures.

(Image credit: Future)

In this case, the fine was discounted by 60% under the leniency programme and by a further 20% to reflect settlement. Despite the reduction, £4.5 million is the largest fine imposed in the UK for resale price maintenance, following Casio's recent £3.7 million fine for similar behavior in the digital piano and keyboard market.

Of the total £440 million in annual musical instrument sales in the UK, 40% comes from online sales, with guitars making up a significant portion of this figure. As such, the CMA highlighted the importance that "musicians have access to competitive prices online."

"It is absolutely essential that companies do not prevent people from being able to shop around to buy their products at the best possible price," says Andrea Coscelli, CMA Chief Executive. "This is especially important for expensive and popular items like guitars, and so Fender’s actions could have had a big impact on customers.

"Quite simply, this behavior is against the law. The fact the CMA has imposed large fines on major musical instrument firms Casio and Fender in a matter of months should be a lesson to this industry and any other company considering illegal behavior. Break competition law and you will face serious consequences."

The European Commission also fined four other companies for resale price maintenance in July 2018: Philips, Pioneer, Asus and Denon.

For more information, head to the Fender investigation web page.