The Competition Appeal Tribunal (CAT) has issued a judgment in Ping’s appeal of the Competition and Markets Authority's (CMA) decision regarding Ping’s online sales ban. The CAT upheld the CMA's findings that the actions of Ping Europe Limited constituted a restriction of competition ‘by object’.
Overview
The CMA decided in 2017 that Ping, a US golf manufacturer, had breached Chapter I of the Competition Act 1998, as well as Article 101(1) of the Treaty on the Functioning of the European Union (TFEU), by preventing two of its UK retailers from selling Ping golfing equipment on their websites. This resulted in the CMA imposing a fine of £1.45 million. Ping appealed to the CAT.
The findings
Ping argued that the ban was necessary to promote its business model of selling custom fitted golf clubs. Key elements of the CAT's findings were broadly that:
- Ping’s policy on promoting custom fitting was not consistent. Some of Ping’s account holders were allowed to sell non-custom fitted golf clubs on their websites, and non-custom fitted clubs were available in other channels (for example by telephone).
- There were less restrictive alternative measures that Ping could have taken to promote the sale of custom fitted golf clubs. These included:
- Recommending to customers that they take advantage of the custom fitting service;
- Requiring retailers to provide consumers with custom fitting options; and
- Requiring retailers to implement a tick-box for consumers to indicate that they understand the importance of custom fitting at the time of purchase of a non-custom fitted item.
The CAT therefore considered there was no basis on which to overturn the CMA’s decision that Ping’s online sales ban constituted a restriction by object.
The CAT also considered the £1.45 million penalty. It was found that the CMA had uplifted the penalty by 10% due to the involvement by Ping’s managing director in creating, implementing and enforcing the internet policies. The CAT ruled that the CMA had “erred in treating Ping’s managing director’s involvement as an aggravating factor”. It found that Ping restricted competition law through its negligence rather than with intention, and director-level involvement was necessary for a company of Ping’s size to implement the policy in question. The penalty was therefore reduced to £1.25 million.
Implications for businesses
The judgment in this case highlights the risks in engaging in what might be considered well established ‘object’ infringements of competition law, such as the ban in online sales in this case.
While the CAT did not consider that the underlying purpose of promoting custom fitting was necessarily problematic, it considered that Ping might have sought to achieve that objective in a less restrictive way.
This case emphasises the value of taking appropriate advice on strategic objectives, on how they might be lawfully achieved, and in ensuring consistency in application of any restrictions.
The CAT’s judgment might however provide some comfort for Managing Directors that their close involvement in such policies might not necessarily prove to be an aggravating factor when it comes to fines- this might otherwise have encouraged a hands off approach which might not have been helpful in seeking to achieve compliance.
Gustaf Duhs