UK: Confirmation that instigation and awareness of cartel activity is sufficient to attract a fine under UK competition law following the CMA’s decision in Rangers Football Club

Executive summary

The case of Rangers Football Club demonstrates that instigation and awareness of cartel activity can be sufficient to attract a fine under UK competition law. Despite not having participated directly in the cartel, the UK Competition and Markets Authority (“CMA”) found that there was a ‘concurrence of wills’ between The Rangers Football Club Limited (“Rangers”), and the cartel’s direct participants: Elite Sports Group Limited (“Elite”) and JD Sports Fashion Plc (“JD Sports”). Rangers was found to have ‘initiated’ and ‘understood’ the coordination of prices between Elite and JD Sports. Rangers subsequently took no steps to distance itself from the conduct, instead expressing satisfaction. You can access the non-confidential version of the CMA’s full decision published on 25 November 2022 here.

Facts of the case

Rangers is a prominent football club in the Scottish Professional Football League. JD Sports is a retailer of branded sportswear. Elite is a supplier of Rangers-branded products and specifically the exclusive worldwide supplier of replica Rangers football kits. Elite supplied Rangers products (including football kits) to JD Sports. Elite and JD Sports agreed that JD Sports would be the exclusive high street retailer aside from Elite’s online and in-store retail channels, which were seen as Rangers’ retail partner. Elite therefore supplied to JD Sports on a vertical basis and also competed with it horizontally.

At the start of the 2018-2019 football season, JD Sports was selling the Rangers replica football shirt at a lower price than Elite. Rangers received complaints from fans due to the fact the shirt was available at £55 with free delivery from JD Sports, but for £60 with £4.95 delivery from the website Gers Online (operated by Elite). Rangers contacted Elite to request that it discuss the price difference with JD Sports. JD Sports agreed with Elite that it would raise its price to £60, and Elite reported this back to Rangers. Correspondence regarding JD Sport’s price for the replica kit continued between the three parties. Elite and JD Sports then went on to extensively coordinate prices and discount campaigns for Rangers-branded products other than the replica kit, though without Rangers’ knowledge.

The CMA opened an investigation in December 2020. In its infringement decision of September 2022, the CMA found the horizontal price fixing between Elite and JD Sports to be a ‘single and continuous infringement’ of Chapter 1 of the Competition Act 1998 spanning September 2018 to July 2019. Rangers’ participation in the cartel lasted for only two months: between September to November 2018.

Rangers’ participation in the cartel

Even though Rangers was not active at the retail level, nor did it directly communicate with JD Sports in regard to the cartel activity, Rangers was found to be a third cartel participant.

The argument that the ‘concurrence of wills’ between Rangers, Elite and JD Sports fell short of an ‘agreement’ for competition law purposes was rejected by the CMA. The CMA found that the conduct gave rise in any event to a ‘concerted practice’ sufficient to breach competition law. Rangers’ involvement in the cartel was constituted on the following basis:

  • The contact between Elite and JD Sports to raise JD Sports’ prices was initiated at Rangers’ request;
  • There was common understanding between Elite and Rangers that the solution would be for JD Sports to increase its price;
  • Rangers understood that Elite would ask JD Sports to raise its prices, or it was at least reasonably foreseeable that it would do so;
  • Rangers took no steps to distance itself from the conduct or report it to the CMA, and instead expressed satisfaction;
  • Elite told JD Sports that its actions were prompted by pressure from Rangers; and
  • Elite reported its conversations with JD Sports to Rangers. Rangers was reassured Elite dealt with the matter and would not need to contact JD Sports personally.

All three parties have been fined as follows: Elite Sports £459,000, JD Sports £1,485,000 and Rangers £225,000 following a settlement discount.

Market definition: the substitutability of football shirts

The CMA made some valuable observations on market definition. In this case, market definition was necessary to calculate the penalty. The decision reinforced the conclusion of an earlier OFT decision that there is no general market for ‘football merchandise’ or ‘replica football kit’. This is because the merchandise of one club is not substitutable for another due to fan loyalty to a particular club. For example, a Rangers supporter is unlikely to purchase a Celtic shirt even if the Rangers shirt went up in price by a small but significant amount such as £5. National team merchandise was found to be an additional rather than substitute purchase. As such, the CMA found the relevant product markets were the retail supply of: (i) Rangers replica kit in the UK, and (ii) other Rangers-branded clothing products in the UK. The CMA therefore found that Rangers replica kit is not part of the same market as other Rangers-branded products. Other Rangers-branded clothing products were also not found to be part of a wider market with non-clothing Rangers merchandise. The market overall was seen to be at least UK-wide given Rangers is a major club with fans located across the UK.

In order to calculate Rangers’ penalty, the CMA considered there was a further product market for the granting of intellectual property licences for the manufacture, distribution and/or retail of Rangers replica kit. The CMA considered that the right to use relevant intellectual property is an essential input for the manufacture and supply of Rangers-branded products.

One effect of narrow market definitions is that it raises the prospect of football clubs having dominance within a particular market. This means clubs have the added responsibility of then ensuring they do not abuse any position of dominance.

Conclusion: a number of salient factors at play

Zero tolerance

This investigation is yet another reminder that the CMA takes price fixing infringements and the exchange of commercially sensitive information extremely seriously. Even when agreements last far less than a year. It sends a clear message to football clubs, not least any businesses that operate in supply chain arrangements, that illegal, anti-competitive collusion will not be tolerated.

Hub and spoke/ facilitation

The decision underlines that the concept of ‘hub and spoke’ arrangements and the ‘facilitation’ of anti-competitive behaviour continue to be actively pursued by the UK competition authorities. The significance of such arrangements is that businesses active on a market different from that affected by the cartel can be liable for all or part of a cartel, whether such involvement is described as a facilitator or as a direct participant. A business is also more likely to be characterised as a direct participant in a cartel where it has a direct and immediate interest in the successful execution of an anti-competitive agreement.

Legal framework for finding a single and continuous infringement

Additionally, the CMA has devised a legal framework to assess whether the parties are part of a single and continuous infringement, which also accounts for businesses that are not active at the same market level as the other participants. This framework has now been used in a number of decisions to assess the parties’ involvement when operating at different levels of the market.

No dawn raids, the importance of internal communications and commercial decisions

The investigation did not seemingly involve dawn raids or a Type-A leniency application (i.e. a leniency application made before the investigation is launched), therefore the CMA must have been ‘tipped off’ or monitoring the market.

The decision also underlines the importance of internal communications and whether it chimes with witness evidence and contemporaneous documentary evidence. Telling the CMA one story, but having evidence that supports another is always a dangerous path to tread. Commercial pressure to act (by customers, or fans or retailers) is not an excuse for engaging in anti-competitive behaviour. As with all cases, hindsight is never of benefit after the event. Having competition compliance procedures in place internally to flag these types of issues early on are, therefore, not just a luxury, but imperative. It is incredibly easy for discussions to tip over into something potentially anti-competitive and if employees cannot recognise those situations or understand where the red flags lie, then the whole business is put at risk. Understanding the concept of ‘distancing’ is also important.

The decision also emphasises that what may be seen as sensible commercial decision-making by some, is not viewed as such by the authorities where suppliers become involved in pricing discussions at the retail level, particularly where the expectation is those discussions will then be had between their retailers. Using customers (or fans) as a reason for putting pressure on retailers to align prices or to optimise fan experience following fan complaints about prices of kit is a false economy. This is because it is usually not insurmountable for the competition authorities to uncover evidence and indeed infer that that the aim of the supplier’s actions was in fact to ensure a price increase by one retailer in order to bring them in line with another retailer. The simple fact is these sorts of tripartite discussions can be viewed as horizontal arrangements by the UK competition authorities.

Director duties, fining, leniency

The Rangers case reinforces that the CMA will find that the involvement of directors or senior management in an infringement is an aggravating fining factor. The CMA reiterates that it considers that company directors have an additional responsibility, beyond that of other employees, to ensure that their companies do not infringe the law, no matter the size of the undertaking. Both Rangers and Elite had directors that were directly involved in the infringement, which resulted in a 15% uplift in the fine. The likelihood is that the CMA will also now pursue director disqualification orders against them.

Finally, the decision underlines that leniency and settlement processes are still very relevant to investigations. Two of the parties signed leniency agreements and all three agreed to settle having admitted to the facts and allegations. Businesses can therefore benefit from a cumulative discount to any fine if they are able to benefit from the leniency and settlement regimes.

Overall, this investigation is one in a long line of recent cases the CMA has pursued against businesses engaged in resale price maintenance and price fixing. In parallel, the investigation into Leicester City Football Club and JD Sports is still ongoing.

The UK Competition law team has significant experience advising businesses on how they can best protect themselves from investigation.

For more information, please contact Dr. Saskia King, Ariane Le Strat and Sean Bullock.


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