The COVID-19 pandemic has forced the majority of UK retail online, turbo-charging the importance of online channels for connecting consumers and retailers.

Businesses with little previous experience of online selling will have to get to grips quickly with various potential pitfalls, including not getting caught out by the strict requirements of competition law in relation to pricing.

Online channels tend to involve low barriers to entry and intense competition, driving down the prices consumers pay, but making it harder for sellers to maintain margins.

The temptation for manufacturers and distributors is to try to keep prices high by dictating what retailers can charge for their products.

However, such practices (known as resale price maintenance, or RPM) breach competition law and so carry significant risk, including fines of up to 10% of turnover.

RPM in the online space has been a key target for competition regulators, with the music sector a particular recent focus.

Earlier this year the Competition and Markets Authority fined guitar manufacturer Fender £4.5m for restricting its trade customers from selling or advertising Fender products online below a minimum price.

This was a CMA record fine for an RPM case, beating the previous record of £3.7m imposed on Casio for a similar offence in relation to digital pianos and keyboards.

The CMA has recently made further RPM allegations against Roland and Korg, manufacturers of electronic drum kits and other high-tech specialist equipment.

Suppliers cannot restrict their downstream customers’ ability to set their own resale prices, as this prevents consumers from finding cheaper prices even if they shop around.

Common RPM practices include specifying a set price or minimum margin, or restricting discounts against a Recommended Retail Price (RRP).

While genuine RRPs are allowed, any threats or pressure on the retailer to comply will be RPM.

Manufacturers who try to stop their goods being sold or advertised online will also face legal problems, as this similarly restricts consumers' options and their ability to compare deals.

The CMA fined golf equipment manufacturer Ping £1.25m for banning online sales of its clubs, and this was recently upheld by the Court of Appeal.

Although Ping was motivated by a desire to ensure its clubs were only sold after an in-store custom fitting, this precluded online sales.

Such a total ban could not be justified when Ping could have pursued less restrictive options.

Retailers can find it difficult to break ranks with their suppliers, with RPM policies often backed by threats of higher prices, reduced support or even withdrawn supplies.

The CMA observed that Casio's RPM system was supported by 'all seeing software' which lets suppliers easily monitor online prices for their goods.

Such technology has also been used to facilitate price-fixing agreements between online retailers, allowing them to coordinate their prices rather than compete with each other.

As this technology develops, the pressure on retailers to comply with suppliers' demands will only increase.

However, retailers should know that they will also be guilty of a competition law breach if they participate in RPM.

While the CMA has so far only fined suppliers, that may change if unlawful arrangements persist.

In particular, retailers who help enforce an RPM scheme by 'tipping off' the supplier about their competitors' non-compliance (a feature of the Casio and Fender cases) may find themselves in the firing line.

Any supplier or retailer unsure about the rules on online pricing should seek legal advice.

Charles Livingstone is a partner and competition law expert at Brodies LLP.

This article first appeared in the Herald.