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Price Fixing And Discounting in The Fashion Sector

Timothy O’Callaghan, partner in Druces LLP’s Corporate & Commercial team, writes regular opinion and legal articles relating to the Fashion industry. A copy of his recent opinion piece on price fixing and discounting in the Fashion industry, published in Drapers’ Record, is set out below:

There has been a great deal of well publicized anguish on the part of bricks and mortar retailers at the discounting practices of e-tailers. Traditional boutiques have accused e-tailers of ‘reckless discounting’ that ‘devalues the industry’. A number of my design clients have been at the sharp end of some choice words (unprintable here) from shops, demanding that they stop supplying certain well known e-tailers who seem intent on riding a coach and horses through the ‘industry standard margin’. What, if anything, can suppliers do to level the playing field between their traditional retailers and the e-tailers?

In a parallel universe calibrated to the desires of designer suppliers, the supplier would be able to set and enforce a recommended retail price, and set out specific provisions (and even perhaps include penalties!) to prevent discounting. Unfortunately, for suppliers, we do not live in such a universe. We live a world (a country at least) that labours (or basks – depending on your point of view) under European Competition Law, as enthusiastically enforced in this country by the Office of Fair Trading (“OFT”). EU Competition Law, provides little solace to the supplier who seeks to set minimum prices. In fact it goes further; it makes any attempts by a supplier to set a minimum price unlawful, the practice known as ‘retail price maintenance’. To engage in retail price maintenance will render the entire supply agreement that contains such a clause as void and unenforceable and, more alarming in recent years, the OFT may impose a fine; which, as the sellers of replica football kits discovered a few years ago, to their surprise, can be as much as £18.6 million pounds. Call it the ‘free market economy’ but there is very little that suppliers can do to assist their traditional retailers against merciless e-tailer discounts.

Timothy O’Callaghan

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