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PENALTY SHOOT-OUT: OFT FINES FOOTBALL PRICE-FIXERS

The Office of Fair Trading’s (OFT) high-profile investigation into football shirt price-rigging has resulted in 10 companies being fined a total of £18.6 million for fixing the price of replica football kits, and therefore infringing UK competition law. The 10 guilty parties include such household names as Manchester United Football Club, the Football Association, Umbro, JJB Sports and Allsports. Allsports, Umbro Holdings, JJB Sports and Manchester United are appealing the decision to the legal review body - the Competition Appeal Tribunal. A final ruling is expected around Easter.

Background

JJB Sports and Manchester United sold football shirts for £39.99 each even though they cost as little as £7 each to make! The investigation kicked-off after supermarket chains Safeway and Tesco reportedly tried to sell the same shirts at a £29.99 and £19.99 respectively. The OFT claims that the alleged cartel was deliberately inflating the price of the football shirts to exploit the UK's £220 million football kit market. Often, the designs of these football shirts change three or four times a season, and thereby encourage football fans to spend £39.99 each time.

Penalties imposed
In calculating the penalties for each party the OFT took into account the factors outlined in the OFT’s guide to financial penalties - ie the seriousness of the price fixing, the need for deterrence and the turnover and the extent of involvement of the parties involved. Two of the parties were granted partial leniency and discounted fines for their limited involvement, and one party was granted full leniency and exempted from the fine for its cooperation in providing the OFT with crucial evidence. The following levels of fines were imposed, in order of value:

• JJB Sports plc - £8.373 million
• Umbro Holdings Ltd - £6.641 million
• Manchester United plc - £1.652 million
• Allsports Ltd - £1.35 million
• Blacks Leisure Group plc - £197,000
• The Football Association Ltd - £158,000 (partial leniency - fine discounted by 20%)
• Sports Soccer Ltd - £123,000
• The John David Group plc - £73,000
• Florence Clothiers Ltd - £20,000 (partial leniency - fine discounted by 25%)
• Sportsetail Ltd – (full leniency - 100% discount from fine of £4,000)

Implications
The £18.6 million football shirt penalties follows the OFT's penalty of £22.6 million handed to Argos and Littlewoods for price-fixing for childrens' toys. These high profile and high value fines indicate the determination of the OFT to wipe out price-fixing. The leniency afforded by the OFT towards the parties who cooperated with the OFT shows yet again that the OFT is willing to use such leniency schemes to extract information and evidence against price-fixers.

In addition, the OFT in deciding the level of fine to impose on Manchester United plc, took into consideration that it was dominant in a separate product market for the licensing of its own brand name. This was separate from the product market of football shirts, and while this shows that high profile brand owners face stiffer scrutiny from the OFT the use of so small a definition of the market in practice results in a low level of fine. This is because the financial penalties guidelines operate by reference to turnover in the relevant market.

It is also worth noting that the activities of the football shirt price-fixers occurred pre-Enterprise Act 2002. Had the activities occurred after the summer of 2003 when the Enterprise Act entered into force, the OFT would have had the additional power to seek a court order disqualifying the directors involved from acting as directors for up to 15 years where he or she deliberately or negligently participated in anti-competitive conduct. More significantly individuals concerned could have faced up to 5 years imprisonment together with unlimited personal fines for the new cartel offence. All future OFT investigations will have serious implications for the individual directors and senior officials involved in anti-competitive conduct as well as their companies.

key expertise

Geraldine Tickle
Partner
geraldine.tickle@martjohn.com

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