Business

Fender Agrees to Pay Record Fine for U.K. Price Fixing

Fender Guitars
Amanda Thomas/Guitarist Magazine/Future via Getty Images

(L to R) Fender Road Worn 50s Stratocaster, 50s Telecaster and 60s Stratocaster electric guitars. 

Fender said its conduct had fallen "well below the highest standards we set ourselves and this is a matter of deep regret."

LONDON — Guitar maker Fender has been fined £4.5 million ($5.9 million) for breaking British competition law.

The fine is the largest ever imposed by the U.K.'s Competition and Markets Authority (CMA) for price fixing, or what it terms as "resale price maintenance."

In Fender's case, the company admitted breaking British competition law by restricting retailers from offering online discounts and requiring stores to sell its guitars at or above a minimum price between 2013 and 2018.

Such restrictions are illegal in the U.K. as they prevent customers from getting the best price for a product, in this case a Fender guitar, as all retailers sell them at the same price.

During the course of its investigation, the CMA found that Fender Europe employees deliberately tried to cover up their actions by recording as little as possible in writing.

Proof of illegal activity came in the form of emails and texts that CMA recovered from Fender's IT servers and mobile phones.

Last August, the authority fined Casio £3.7 million ($4.8 million) for similar practices relating to the sale of its keyboards and digital pianos.

Like Casio, Fender co-operated with the CMA's investigation in return for a reduced fine. The maximum fine the CMA could have imposed on Fender was 10% of global sales.

According to the CMA, music instrument sales are worth around £440 million ($576 million) in the U.K. each year, with guitars accounting for a large proportion of instruments sold.

Online sales account for around 40% of all sales, says the CMA, making it "absolutely essential that companies do not prevent people from being able to shop around to buy their products at the best possible price," said CMA chief executive Andrea Coscelli.

"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 behaviour is against the law," said the chief exec.

He warned that the large fines imposed on Casio and Fender "should be a lesson to this industry and any other company considering illegal behaviour."

"Break competition law," said Coscelli, "and you will face serious consequences."

In a statement, Fender said its conduct had fallen "well below the highest standards we set ourselves and this is a matter of deep regret."

The company said that as a result of the investigation, it had taken "additional steps to enhance our compliance procedures" and will "continue to rigorously monitor the business' adherence to anti-trust and competition laws."