Will you be investigated by the Competition and Markets Authority?
The Competition and Markets Authority expects to investigate more businesses involved in cartels as a result of its new cartel awareness campaign. The Authority's 2015 campaign led to a 30% increase in tip-offs to the Authority from company's involved in cartels seeking guarantees of no penalties in return for co-operating with the CMA's investigations of the other companies involved in the cartel. In the last three years the Authority has imposed fines of £155m on companies involved in cartels.
Why has the campaign been launched?
Of the 1,201 companies recently surveyed by the Authority:
- Only 57% were aware that price fixing is illegal;
- 48% were either unaware (23%) or believed that it was legal (25%) to discuss prices with competing bidders when quoting for new work; and
- 59% were unaware (24%) or believed that dividing up and sharing customers with rivals was legal (35%).
The campaign is particularly directed at sectors where there is evidence of cartel activity including construction, estate agents, maintenance, manufacturing, property management and recruitment. The campaign will no doubt enable the CMA to fully utilise the resources in its new offices in Manchester and Edinburgh.
What does it mean for you?
The CMA's leniency programme automatically entitles the first company reporting a cartel to the Authority to a 100% reduction of any fine that it may be imposed on the company. The leniency programme also protects the directors of the company from disqualification and also protects individuals from criminal prosecution.
The Authority's campaign is designed to increase the number of leniency applications and the number of cartel investigations carried out by the CMA – and the number of companies investigated and fined, the number of directors disqualified and the number of individuals prosecuted for involvement in a cartel. The CMA intends to involve more SMEs in cartel investigations so that smaller business comply fully with competition law, too.
What are cartels?
Cartels are arrangements are "a form of co-ordination between undertakings which, without having reached the stage where an agreement properly so-called has been concluded, knowingly substitutes practical co-operation between them for the risks of competition".
Examples of cartel activity are:
- Price fixing, where instead of competing with one another competitors agree to a pricing structure;
- Rigging bids, where suppliers confer prior to bids and agree who the winner will be and the price at which they will win;
- Market sharing, where competitors agree to divide a market in order to avoid competing against one another; and
- Controlling the output or limiting the quantity of goods and services that is available to purchasers.
Participation in a cartel is illegal and can result in:
- a firm being fined of up to 10% of its annual turnover;
- Individuals being imprisoned for up to 5 years; and
- directors facing disqualification for up to 15 years.
What should I do?
Operate an effective competition compliance programme which will identify inadvertent breaches of competition law, enable you to take advantage of the CMA's leniency programme and provides evidence of mitigating factors in the event that you are the subject of an investigation by the CMA.
Addleshaw Goddard has a market leading competition law practice and can assist you with your competition compliance. Please contact a member of the team if you would like to discuss the issues raised in this article.