Online retailer price-fixing under scrutiny in Black Friday build-up

In the build up to 'Black Friday', the Competition and Markets Authority (CMA) has taken the unusual step of reminding companies that sell goods online that discussing and agreeing price levels with competitors is illegal and could result in them being slapped with hefty fines.

The warning comes just over a fortnight ahead of the Black Friday shopping bonanza in which retailers slash prices online and in store as part of the countdown to Christmas.

This CMA reminder coincides with it writing to a number of online companies "which may be denying customers the best available deals" and reminding them of their obligations under competition law.

Check out our Cheap Online Shopping guide for full info on how to bag a bargain.

What are the rules on fixing prices?

Broadly speaking, companies aren't allowed to collude with their competitors to fix prices – those that do can find themselves in hot water with the regulator.

Price-fixing is a type of 'cartel' in which customers are denied access to cheaper or better value products. It includes:

• A company agreeing with a competitor what price to charge customers

• Agreements not to sell below a minimum price, or simply agreeing not to undercut a competitor

What action can be taken against a company found guilty of price-fixing?

The penalties can be far-reaching and severe. They include:

• Fines for businesses of up to 10% of their annual turnover

• Disqualification for company directors from managing a company for up to 15 years

• Up to five years in prison for individuals personally involved in cartels

In a recent decision by the CMA, a fine of more than £160,000 was imposed on an online seller of posters and frames, Trod Ltd, for agreeing with a competitor, GB Eye Ltd (trading as GB Posters), not to undercut each other's prices when selling on Amazon's UK website. GB Eye escaped a fine by reporting the cartel under the CMA's leniency programme.

What does the CMA say?Stephen Blake, senior director of the CMA's cartels and criminal group, says: "Online markets are a hugely valuable tool for consumers to shop around and find the best value products, making the most of effective competition. But these benefits for shoppers are put at risk if the suppliers seek to restrict competition between them. "The CMA is strongly committed to tackling anti-competitive behaviour in online markets. Entering into agreements that limit price competition cheats consumers, is illegal and can have serious consequences for the companies and individuals involved."We recognise that the majority of online sellers want to comply with the law. As we enter the peak shopping months of November and December, sellers should make sure they have read our advice so they don't get caught out. The consequences for those who don't can be serious."

When is Black Friday?

If you're interested in bagging yourself a bargain ahead of the festive season, you may want to mark Friday 25 November in your diary – that's the date of Black Friday this year.

An American import, Black Friday is traditionally the day after Thanksgiving, which falls on the fourth Thursday in November.

In previous years Black Friday has been characterised by frantic shoppers piling into stores in search of big savings. However, this year retailers expect the majority of sales to be online.