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UK Competition and Markets Authority Opens Investigation into Auction Service Providers

On 22 November 2016, the Competition and Markets Authority (“CMA”) announced that it had opened a formal investigation into suspected anti-competitive practices in relation to the supply of auction services in the UK.

In its announcement the CMA stated that the investigation is focusing on suspected anti-competitive pricing practices, including most favoured nation (“MFN”) provisions in respect of online sales potentially affecting the market for auction services in the UK. Although the CMA has not at this stage revealed the identity of the companies under investigation, according to market intelligence sources the authority is targeting a business that provides real-time online services to auction houses, in return for a commission on auction sales.

It is understood that the CMA’s investigation was prompted by an allegation that the business under investigation is attempting to restrict new competitors from entering the market for online auction services through quasi exclusive deals with auction houses. The complaint pointed to MFN clauses that may have affected auction houses.

Increased Antitrust Focus on MFN Clauses 

MFNs (also known as “most favoured customer”, or "prudent buyer", or "non-discrimination" clauses) are contractual provisions in which the seller promises the buyer that it will not offer another buyer better terms (most often regarding pricing) than those offered to the first buyer. MFNs have recently been under increasing scrutiny by competition authorities across Europe. There have been a number of recent cases, examining the potential anti-competitive effects of MFNs in various sectors, in particular in online markets (such as hotel booking, e-books, and price comparison websites). Those cases have resulted in diverging outcomes, showing that the law on MFN clauses is complex.

The CMA will now conduct an initial investigation, during which it will gather information, with a view to deciding whether or not there has been a competition law infringement. The CMA has stated that it has not reached a view as to whether there is sufficient evidence of an infringement of competition law for it to issue a statement of objections to the business under investigation; and currently estimates that it will decide in May 2017 whether to proceed with, or to close its investigation.

Implications for auction service providers and others 

In light of this investigation, there is an increased risk that the CMA may contact other auction service businesses with a view to gathering information about their commercial arrangements. It may therefore be an opportune time to review commercial agreements and practices and assess their compliance with competition law. In particular, it may be advisable to examine whether current commercial agreements or terms have unidentified MFN clauses, as very often these clauses are difficult to identify and can be overlooked by companies.

Copyright 2020 K & L GatesNational Law Review, Volume VI, Number 336


About this Author

Sean Kelsey, KL Gates, multi jurisdictional litigation attorney, international arbitration lawyer
Senior Associate

Sean Kelsey is a senior associate in the dispute resolution and litigation department of the firm’s London office. He has represented clients in a wide range of domestic and international commercial, corporate and regulatory disputes. His practise encompasses the English High Court, Court of Appeal and Supreme Court, complex multi-jurisdictional litigation, and international arbitration. His experience spans many sectors of the economy, including natural resources, extractive industries, specialty chemicals, manufacture, import, transport and distribution, retail,...

Neil A. Baylis, KL Gates, Telecom Industry Lawyer, Trade Regulation Attorney

Neil is a partner in the Competition and Trade Regulation, Travel and Leisure, and Telecom, Media and Technology practice groups. He has experience in advising clients on all aspects of EU and UK commercial and competition law. His work covers drafting and advising on commercial agreements; merger control; bringing and defending competition law based complaints before the regulators; drafting and implementing compliance programs; advising on regulatory issues under EU laws, advising on consumer law issues; and advising on litigating competition law issues before the English courts. He has advised on major cases in the following industries: automotive; construction materials; fertilisers; subsea cables; travel; media; sport; betting and gaming; beverage; transport; and oil and gas services.

Legal 500 2016 (Travel) - ‘Well versed in the travel sector’, K&L Gates LLP advises on a range of commercial and regulatory matters for clients such as ABTA, Amadeus, Contiki, Red Savannah, CHR Travel and Home House. Leading individual Neil Baylis is ‘a key player in the market’