The Competition and Markets Authority (“CMA”) announced on 5 July 2023 that it had reached a settlement with Leicester City Football Club under which Leicester City has agreed to pay a fine of £880,000 for participating in anti-competitive agreements with JD Sports. This penalty follows similar recent fines imposed by the CMA for the sale of football merchandise and includes a potentially significant discount for Leicester City’s cooperation. JD Sports received immunity from fines in exchange for “blowing the whistle” on the arrangement under the CMA’s leniency scheme.
The illegal conduct
The fine relates to the sale of Leicester City football kits and other branded clothing supplied by Leicester City to JD Sports over the course of two and a half football seasons. The CMA’s statement of objections provisionally found that the two firms had engaged in anti-competitive behaviour by entering into:
1. An agreement that JD Sports would not sell Leicester City-branded clothing online for the 2018/19 season; and
2. An agreement that JD Sports would apply a delivery charge to all orders of Leicester City clothing in the 2019/20 and 2020/21 seasons. This was contrary to the usual firm-wide promotional offer offered by JD Sports which allowed for free delivery on orders over £70 and was designed to ensure that JD Sports did not undercut direct sales by Leicester City.
This meant that the firms, which compete for sales of Leicester City kits to consumers, had entered into a cartel, first by allocating markets between them (JD Sports’ agreement not to sell kit online in 2018/19) and second by fixing prices (JD Sports’ agreement to impose delivery charges so as not to undercut Leicester City’s own sales). These types of agreements are illegal under section 2 of the Competition Act 1998 and are considered to be the most serious infringements of competition law, with the most significant penalties including fines of up to 10% of global group turnover of the businesses involved, disqualification of directors, and potential criminal penalties including imprisonment.
CMA enforcement activity has seen a marked uptick in recent years, including most recently seeing fines of £60m imposed on demolition contractors. Proposed changes to UK competition law (which we reviewed here) will increase its powers of investigation, and potential penalties.
Leniency
JD Sports, which might otherwise have faced huge fines itself given its size, was able to avoid any CMA penalty in return for bringing the illegal behaviour to the CMA’s attention under its leniency policy. This policy awards full immunity from civil and criminal penalties to the first participant in an illegal anticompetitive arrangement that reports the illegal conduct to the CMA. Anticompetitive agreements frequently come to the CMA’s attention this way, as we covered in our recent podcast.
By admitting to participating in the infringement, Leicester City was also able to secure a lower fine than the CMA might otherwise have imposed, in recognition of its full cooperation and the cost savings on the CMA’s investigation generated by the football club’s admission. If another participant has already obtained leniency then full immunity is off the table, but significant reductions in fines can still be achieved from cooperating fully with the CMA’s investigation.
Both companies may though be sued for damages by any person who suffered loss as a result of the anticompetitive agreements. Given that the conduct is likely to have led to a large number of consumers suffering a small loss each, a “class” or representative action might be the most likely road for that to take.
This case once again highlights the importance of reporting any potential anti-competitive conduct to the CMA as soon as a business becomes aware of it in order to receive full immunity, as well as the value of compliance policies and in-depth training that can help employees identify competition risks, and breaches, in good time to avoid or report them and mitigate the risk of penalties. Immunity will only apply to the first applicant that reports and provides evidence of the cartel to the CMA.
