Football shirt suppliers have been found guilty of ripping off millions of customers by fixing the prices of replica kits, the Evening Standard can reveal.
The Football Association, shirt manufacturers Umbro and a string of high street sports shop chains are facing a total of £100 million in fines.
The verdict comes after a two-year investigation by the Office of Fair Trading. The OFT's damning report has concluded that shirt makers and suppliers broke competition law by selling England and Manchester United tops for upwards of £39.99 when they cost just £7 to make.
The verdict strikes a blow for parents who have long been angered by high prices and the release of frequently changed strips in different colours - sometimes in the same season.
The report will show that OFT officials found documents in a raid on Umbro's headquarters which showed the company was intent on forcing stores to sell their stock at a premium price.
Any retailers who refused would be struck off their supply list and given no more shirts to sell, the documents revealed.
Sources say the companies involved - including JD Sports, JJB Sports and Allsports - could be hit with fines amounting to 10 per cent of their turnover.
Manchester United also stand accused of price-fixing but it is unclear whether the club, which has the biggest merchandising operation in the game, will be found to have breached the law.
The findings are centred on England and Manchester United kits, but the results will have implications for prices of all football shirts. The exposé will leave customers in no doubt that they have been systematically ripped off for years.
The replica football shirt market is worth more than £200 mill ion a year. The OFT's examination has already triggered a change in the pricing of football shirts.
JJB Sports website was today offering an adult's, short-sleeved England shirt at £25, while the FA's website had the same shirt for £34 and it was also available for sale through Surrey-based company Simply Sports at £39.99
The FA hopes to get away with a lenient fine, insisting it was guilty of no more than a "technical" breach of the rules and had no involvement in the Umbro deal.
But Umbro, which appears to have been setting the prices, could be hit hard. The shirt manufacturer and high street sports shops are almost certain to appeal.
JJB Sports has issued a statement declaring its innocence. The OFT report is to be published within weeks.
By Victoria Fletcher, Consumer Correspondent, Evening Standard 30 May 2003
Football kit 'price-fixers' fined
Manchester United and several leading sportswear firms have been ordered to pay more than £16m ($29m) in fines for fixing the price of football shirts.
The ruling from the Competition Appeal Tribunal upholds a decision by the UK Office of Fair Trading (OFT) in 2003.
The OFT imposed fines on 10 firms following a probe into the price-fixing of replica football shirts.
Whilst it backed the OFT's decision, the tribunal did cut the fines handed down to Man Utd, JJB Sports and Umbro.
It increased the fine levied on retailer Allsports to £1.42m, from £1.35m.
Manchester United, JJB Sports, Umbro and Allsports appealed against the fines, imposed in August 2003.
LAUNCH PRICE OF REPLICA SHORT-SLEEVE SHIRT
England (2005-7): £29.95
Manchester Utd (2004-6): £39
Arsenal (2004-5): £39
Celtic (2005-6): £39.99
Source: Football Association/club shops
Replica kits have been an extremely lucrative source of revenue for clubs, many of which launch new home and away strips every season.
Sales of replica kits are worth more than £200m, according to UK-based consumer research analyst Mintel.
The OFT 's original investigation began in June 2001, following complaints over the price of England and Manchester United short-sleeve adult and junior shirts.
The watchdog found that in the run-up to Euro 2000, most retailers were selling replica England football kits for no less than £39.99.
Four years later - following the watchdog's investigation - similar shirts were available for as little as £25.
JJB Sports' fine - the largest single penalty originally imposed by the OFT - was cut to £6.3m from £8.37m; Umbro's fine was reduced to £5.3m from £6.6m; and Manchester United's fine reduced to £1.5m from £1.6m.
JJB Sports said it was disappointed the reduction in its fine did not go further. The company said it planned to appeal against the tribunal's ruling
But OFT chairman Sir John Vickers welcomed the decision.
"Anti-competitive agreements to fix the prices of replica kit exploited the loyalty of fans,"
"The (tribunal) has confirmed that such serious breaches of competition law call for penalties with serious deterrence."
Six other organisations were fined by the OFT but did not appeal.
They were the Football Association (£158,000); Blacks (£197,000); Sports Soccer (£123,000); JD Sports (£73,000); Sports Connection (£20,000); and online store Sportsetail (fine reduced to nil by leniency).
In its 2003 ruling, the OFT also found that price agreements had been put in place for the sale of Chelsea, Celtic and Nottingham Forest shirts, but these clubs were not fined
Football kit price fixing ended
PN 30/99 6 August 1999
The Football Association (FA), the English Premier League clubs and the Scottish FA have given assurances to the Director General of Fair Trading that they will now take action to prevent resale price maintenance in the £210m-a-year market for replica football kits.
They have agreed that new licensing contracts will include a requirement that retailers will not be prevented from discounting replica football kits. Where contracts already exist the manufacturer will be obliged to tell dealers that they can sell the kits at whatever price they choose.
Similar assurances are expected shortly from the Scottish Premier League clubs.
The assurances end an investigation prompted by complaints from retailers that they were being prevented from discounting from manufacturers' recommended list prices. The OFT has already obtained assurances from some kit manufacturers that they will not try to enforce minimum resale prices. Gilbert and Pollard Sports Ltd (which supplied, at the time, replica kit for Coventry City) and Puma UK and Asics (UK) Ltd (which supplied kit for Leeds United).
During the investigation of price-fixing the OFT found evidence that clubs encouraged manufacturers to withhold supplies from retailers who were selling at a discount.
John Bridgeman, Director General of Fair Trading, said today:
'A campaign by the OFT to flush out price fixing in the sportswear market resulted in a flood of complaints. Retailers told us that manufacturers had threatened to withhold supplies of replica kits if resale prices dropped below a set minimum. This is unlawful under the Resale Prices Act.
'We also have conclusive evidence that some premier league clubs have encouraged manufacturers to prevent discounting. In doing this they have not themselves breached the law – because they are not considered to be suppliers – but any involvement in price maintenance is totally unacceptable.
'I welcome the co-operation of the associations and clubs in trying to root out price-fixing. I have no doubt that both supporters and parents have been paying artificially high prices.
'Retailers are now free to set their own prices and I hope that we will soon see a variety of discounts. Parents and fans can encourage this by shopping around and raising questions about prices which are the same wherever they go. Vigorous competition in a market should ensure that they can enjoy a choice of products and prices. If that does not happen the OFT will want to know about it.
'It is unlawful for a supplier of goods to make it a condition of supply that its goods will not be sold below a specified price, to notify to dealers a minimum price, or to seek to impose resale price maintenance on dealers by withholding supplies or discriminating against them in other ways.
'From 1 March 2000 I will have considerably improved powers of investigation and will be able to impose penalties of up to ten per cent of UK turnover on any party involved in price-fixing. There does not have to be a formal agreement – informal co-operation will be enough to attract financial penalties.'
The Football Association Ltd licenses English national kit, the Scottish Football Association licenses Scottish national kit. The premier league clubs have individual licences with manufacturers.
1. Football clubs benefit from the sale of replica kits in at least three ways: they issue licences to manufacturers, receive royalties on each kit sold and receive additional income from their own retail and mail-order operations.
2. At the beginning of 1997 the Office launched an initiative aimed at tackling resale price maintenance in the sectors of sports equipment, clothing and footwear. This was prompted by the disproportionate number of complaints of price-fixing and refusal to supply that these sectors had generated over many years.
3. The sporting goods campaign was opened with a press notice on 21 January 1997. Beginning on 4 February, a series of advertisements was placed by the Office in the trade press, inviting potential informants to contact it. The press coverage and advertisements generated a considerable number of calls from would-be whistleblowers. The Director General subsequently obtained informal assurances under the Resale Prices Act 1976 (see below) as to their future conduct from ten suppliers of sporting goods as a direct result of the campaign, three of them suppliers of football kit.
4. Assurances were signed by the Barnet-based Gilbert and Pollard Sports Ltd on 21 April 1998 and by Leatherhead-based Puma and Warrington-based Asics on18 September 1997.
The text of the assurances is as follows:
ASSURANCES FOR ENGLISH PREMIER LEAGUE CLUBS
The Director General of Fair Trading is concerned that the freedom of retailers to set the price of replica football kit should be protected. With a view to securing this, [NAME] Football Club ('the Club'), of [ADDRESS], hereby gives to the Director General of Fair Trading the following assurances:
1) In any future contract to license a manufacturer to produce for retail sale replica football kit, the Club will include the following provisions:
a) [The manufacturer's name] ('the Company') will not itself or through any officer of the Company or any person authorised to act on behalf of the Company: -
i) include in a contract for sale or agreement relating to the sale of replica football kit a term or condition which purports to establish or provide for the establishment of minimum prices to be charged on the resale of replica football kit in the United Kingdom; or
ii) require, as a condition of supplying replica football kit to a dealer, the inclusion in a contract or agreement of any such term or condition, or the giving of any undertaking to the like effect; or
iii) notify to dealers, or otherwise publish on or in relation to replica football kit, a price stated or calculated to be understood as the minimum price which may be charged on the resale of those goods the replica football kit in the United Kingdom; or
iv) withhold supplies of replica football kit from a dealer seeking to obtain them for resale in the United Kingdom on the ground that the dealer:
(1) has sold in the United Kingdom at a price below the resale price replica football kit obtained, either directly or indirectly, from the Company, or has supplied such replica football kit, either directly or indirectly, to a third party who had done so; or
(2) is likely, if the replica football kit is supplied to him, to sell it in the United Kingdom at a price below that price, or supply it, either directly or indirectly, to a third party who would be likely to do so.
In this subsection (iv), 'resale price' in relation to a sale of any description, means any price notified to the dealer or otherwise published by or on behalf of the Company as the price or minimum price which is to be charged on or is recommended as appropriate for a sale of that description, or any price prescribed or purporting to be prescribed for that purpose by a contract or agreement between the dealer and the Company.
b) For the avoidance of doubt, nothing in these assurances shall prevent the Company from recommending resale prices to dealers provided no impression is given that, in doing so, the Company is notifying a minimum price.
c) The Company may, notwithstanding any of the foregoing, withhold supplies from a dealer, or cause or procure a supplier to do so, if it has reasonable cause to believe that within the previous 12 months the dealer, or any other dealer to whom the dealer supplies goods, has been using as a loss-leader any replica football kit whether or not obtained from the Club.
2) Where the Club has an existing licensing arrangement with a manufacturer of replica kit, it shall draw the attention of the manufacturer to the substance of the above provisions by notice in writing. The Club shall send a copy of each such notice to the Director General of Fair Trading marked for the attention of Competition Policy Division 1b within two weeks of the date of these assurances. The Club will formally request each manufacturer to circulate to its dealers within one month from the date of these assurances a statement conveying the substance of the notice it has received from the Club, advising dealers that they are free to sell, advertise and display for sale goods replica football kit supplied by the manufacturer at whatever price they may choose, and that if they are concerned that the manufacturer is imposing or attempting to impose a minimum resale price, the dealer should inform Competition Policy Division 1b of the Office of Fair Trading.
3) The Club will not cause or procure any manufacturer with whom it has a licensing arrangement for the manufacture of replica football kit to do any act or cause to be done any thing which would constitute a breach of the Resale Prices Act 1976.
The Club will provide the Director General with such information as he may need in order to satisfy himself that these assurances have been complied with.
In these assurances the term "replica football kit" means football shirts, shorts and socks to which the Club's trademark are applied.