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23rd June 2017
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£2.8 million fine for furniture parts cartel
Two firms that make furniture parts have agreed to pay fines totalling £2.8 million for illegal cartel activity, after a Competition and Markets Authority investigation.
The companies, which supply drawer parts to well-known furniture manufacturers such as Silentnight, have admitted that they broke competition law by agreeing not to compete on price and sharing out which customers they would supply - reducing customer choice and giving the appearance of competition where there was none.
Thomas Armstrong (Timber) and Hoffman Thornwood have agreed to pay the fines after admitting market sharing, co-ordinating prices, bid-rigging and exchanging commercially sensitive information.
Another manufacturer, BHK (UK) confessed its involvement in cartel activity shortly after the start of the investigation and will not be fined, provided it continues to co-operate with the CMA, and complies with the other conditions of the CMA's leniency policy.
Stephen Blake, CMA senior director for cartels, said of the case:
"When competitors collude like this, they do so at the expense of customers, increasing prices, and reducing quality and choice. In this case, the collusion concerned products which are found in furniture in homes and offices across the UK.
"The settlement demonstrates the CMA's determination to pursue those who take part in anti-competitive behaviour, which is harmful to consumers, businesses and the wider economy."
Following intelligence received via the cartels hotline, the CMA investigated two separate infringements of competition law involving the supply of drawer components to UK furniture makers.
The infringements admitted relate to:
* The supply of chipboard and MDF-based drawer 'wraps' to the bed, office and domestic furniture industry in the UK, between April 2006 and September 2008, involving BHK (UK) and Thomas Armstrong (Timber) (the drawer wraps cartel); and
* The supply of chipboard and MDF-based drawer fronts to the bed industry in the UK, between July 2006 and September 2008, and between at least September and October 2011, involving Thomas Armstrong (Timber) and Hoffman Thornwood (the drawer fronts cartel).
The Competition Act 1998 prohibits agreements, practices and conduct that may have a damaging effect on competition in the UK. The Chapter/ prohibition covers anti-competitive agreements and concerted practices between businesses ('undertakings') which have as their object or effect the prevention, restriction or distortion of competition within the UK. Article 101 of the Treaty on the Functioning of the European Union (TFEU), covers equivalent agreements or practices which may affect trade between EU member states. Any business found to have infringed the prohibitions in the Competition Act 1998 or the TFEU can be fined up to 10% of its annual worldwide group turnover.
Thomas Armstrong (Timber) and its parent company, Thomas Armstrong (Holdings), have agreed to pay a maximum penalty of �1,509,000 in relation to the drawer wraps cartel and a maximum penalty of �684,000 in relation to the drawer fronts cartel. These penalty figures include a 20% reduction for settlement (to reflect the fact that the companies have admitted breaking competition law and have agreed to follow a streamlined procedure for the remainder of the case).
The liability of Thomas Armstrong (Holdings) arises from the fact that it held 99.95% of the shares in Thomas Armstrong (Timber) during the relevant period, and is therefore presumed to have exercised decisive influence over Thomas Armstrong (Timber) and to form part of the same 'undertaking'.
Hoffman Thornwood Ltd and its parent company, Consolidated Timber Holdings, have agreed to pay a maximum penalty of �688,000 in relation to the drawer fronts cartel, which includes a 20% reduction for settlement (to reflect the fact that the companies have admitted breaking competition law and have agreed to follow a streamlined procedure for the remainder of the case). The liability of Consolidated Timber Holdings arises from the fact that it held 100% of the shares in Hoffman Thornwood during the relevant period, and is therefore presumed to have exercised decisive influence over Hoffman Thornwood and to form part of the same 'undertaking'.
The fines will not become payable until after the CMA has issued a formal infringement decision imposing the fines and setting out the CMA's findings in full, together with the basis for the calculation of the fines. The next procedural step is the issue of a formal statement of objections, which is expected by the end of January 2017.
A party under investigation may ask to enter into settlement if it is prepared to admit that it has breached competition law and is willing to agree to a streamlined administrative procedure for the remainder of the investigation. In return, the CMA may agree to impose a reduced penalty on the business where settlement would achieve clear efficiencies, resulting in the earlier adoption of any infringement decision and other resource savings.
For more information on settlement see Chapter 14 of the CMA's Guidance on the CMA's investigation procedures in Competition Act 1998 cases.
The CMA operates a rewards policy under which it may pay a financial reward of up to £100,000 in return for information which helps it to identify and take action against illegal cartels.
Anyone who has information about a cartel is encouraged to contact the CMA cartels hotline via:
T: 020 3738 6888
20th January 2017