Investigation into Yamaha-Kemble UK Ltd’s discount scheme

Party:                          Yamaha-Kemble Music UK Ltd (Yamaha)

Case closed:             8 September 2006

Issue:                          The discount scheme operated by Yamaha Kemble

Relevant provision: Chapter I prohibition

Outline of the case

In December 2005, the OFT opened a formal investigation into Yamaha’s discount scheme for its high-end digital pianos and keyboards following complaints from dealers.

The scheme, which Yamaha introduced in July 2005, introduced a cost structure that offered discounts which rewarded face-to-face sales of its high-end electronic pianos and keyboards.  The scheme was a retrospective scheme that applied to the totality of sales by dealers.  The amount of discount given under the scheme was dependent on the ratio of face-to-face sales versus distance (internet) sales.

The OFT expressed concerns that Yamaha’s scheme acted as an effective restriction on distance (internet) sales and that it acted as a price-stabilising measure which was targeted at dealers who are seen as ‘discounters.’ 

The OFT believed that, as the discount level was dependent on ratio of distance (internet) versus face-to-face sales, the scheme provided a disproportionate incentive for dealers to limit their distance (internet) selling activities. This was aggravated further by difficulties a dealer might face in controlling the ratio once a website for selling the products in question has been established. This created an uncertainty over the cost of a unit, whether sold over distance (internet) or face-to-face, which had an inflationary effect on prices.

However, before the OFT came to a final view, Yamaha took the decision to withdraw the scheme.  Yamaha has since announced a new system for offering discounts to its retailers, which does not share the above characteristics.

In light of the scheme’s withdrawal, the OFT has closed the case on the grounds of administrative priorities.

RE: INVESTIGATION INTO RETROSPECTIVE DISCOUNT SCHEME BY  YAMAHA-KEMBLE UK (“YAMAHA”)

The purpose of this letter is to inform you of the outcome of the investigation by the Office of Fair Trading (“OFT”) into Yamaha under Chapter I of the Competition Act 1998 (“the Act”).  The investigation has centred on Yamaha’s retrospective discount scheme which sought to reward face-to-face sales (“the scheme”).  For the reasons explained below, we have decided that we are going to close the case on the grounds of administrative priorities.  I must emphasise that, although it is not our intention to take any further action against Yamaha at this time, if any further evidence of infringement by Yamaha comes to the attention of the OFT, this will be considered extremely seriously by the OFT and could lead to the OFT reopening the investigation.

Cessation of Infringement and Changes in Yamaha’s Conduct

It is quite clear that Yamaha took the OFT’s investigation and that it takes its obligations under the Act very seriously. We believe that Yamaha has cooperated fully throughout the investigation (including the provision additional material which significantly assisted the OFT in its investigation). Further, when the OFT’s concerns were made clear to Yamaha it took steps to cease the conduct and withdraw the scheme. Yamaha is introducing a new scheme, on which they have sought the OFT’s informal advice.  It is the OFT’s view that this new scheme addresses the concerns the OFT expressed with respect to its predecessor. Yamaha is also taking steps to ensure that its retailers fully understand these changes.

Conclusion

The Office continually keeps under review its priorities given the finite resources at its disposal, by considering carefully the benefits of progressing an investigation, primarily with reference to our goal of making markets work well for consumers.  In this way we maximise effectiveness by targeting resources to areas where we believe there are greatest competition concerns and greatest likelihood of consumer detriment.  We are also mindful of the burdens imposed on businesses, including the uncertainty of an investigation.

In the present case, in light of all the factors above and the specific details of the case, including the short duration of the potential infringement, we have concluded that it would not be an appropriate use of the Office’s resources to continue with the investigation and ultimately to an infringement decision. Consequently, we have decided to close the case.