The UK Competition and Markets Authority (CMA) has stepped up its efforts to crack down on price-fixing in the UK. We've got five tips for staying compliant.
Only 57% of companies in the UK knew that price-fixing was illegal when surveyed by the ICM on behalf of the CMA in 2018. The bigger concern was that awareness had only improved by 2% since the previous survey in 2014.
So, what are the consequences of breaching UK price-fixing legislation? And most importantly, how can you avoid price-fixing and other anti-competitive practices?
What are the rules on price-fixing in the UK?
In the UK, businesses and their owners, managers, and employees, must not discuss the prices they will charge their customers with their competitors.
A company would be breaking the law if they agree with another business:
- to charge the same prices to customers
- to offer discounts or increase prices at the same time
- to charge the same fees to intermediaries, e.g. retailers selling products on the company's behalf
What are the penalties for price-fixing?
The issue is, price-fixing leads to over-inflated prices and unfair treatment of consumers. It creates an unfair environment for customers, who pay more for lower quality goods and services.
If found guilty of price-fixing, a company can face a fine of up to 10% of turnover. Individuals themselves can also receive personal files, director disqualification - or even jail time.
The cases below show just how significant the financial penalty can be.
Trod Ltd - price-fixing - £163,371 fine
Trod admitted to agreeing with its online competitor, GB Posters, not to undercut prices for posters and frames sold on the Amazon marketplace. The two companies sold a range of sports and entertainment-branded merchandise between 2001 and 2015 and fixed prices using automated software. GB escaped fines after reporting the cartel to the CMA.
Ultra Finishing - Retail Price Maintenance - £826,000 fine
Bathroom supplier Ultra Finishing Ltd were fined a whopping £826,000 by the CMA after admitting Resale Price Maintenance (RPM) between 2012 and 2014. Ultra threatened retailers with penalties if they sold products below the RRP, including ceasing supply, withdrawing their rights to use their images online, and charging them more for products.
Five simple ways to avoid price-fixing
1. Be aware of anti-competitive risks
Competition law applies to all businesses. Whether you're a small or large business in the online markets, sales, or brick-and-mortar outlets, you need to be aware of the risks.
These risks include having competitors who are also your customers and contact you with competitors through work or social occasions, for example, when you cross paths at trade events and award ceremonies. If you have staff that regularly move between businesses in the same sector, this can also be a risk.
2. Know which conversations are off-limits
Employees should never discuss pricing strategies with competitors.
Subjects to be avoided include:
- No discussing prices or fees
- Discussing (carving up) customers or territories
- Colluding to agree to rules that are not in the interests of consumers
Sharing information about your commercial plans is also to be avoided as it could increase your risk.
3. Spot & react to price-fixing red flags
Knowing the risks makes it easier for people to spot and prevent red flags for potential price-fixing.
If you find yourself in a trade meeting where anti-competitive practices are discussed, be sure to have your objections minuted (if possible). Make your excuses and leave promptly, then report it to your legal or compliance team.
4. Don't abuse a dominant market position
Aside from price-fixing, anti-competitive practices include abusing a dominant position. If your company has more than a 40% market share or is not affected by normal competitive restraints, you hold the 'dominant position'.
If this applies to your business, you must not deliberately make losses to squeeze smaller businesses out of the market, stop supplying existing customers or prevent them from buying from competitors, or impose unfair terms in contracts. All this counts as abuse of that dominant position.
5. Report anti-competitive concerns to the CMA
Your company should have its own procedures and policies for reporting price-fixing and other anti-competitive pricing.
The CMA's latest cartel awareness campaign, Do What's Right, provides useful information for reporting cartels. If you've been directly involved, you can call 020 3738 6833 for confidential guidance. If you speak up first, you may avoid sanctions.
If you've seen price-fixing take place, you can also report it on +44 (0)20 3738 6888.
How much do your employees really understand about competition law and its practices? To help, we have produced a free training presentation, packed with interactive learning activities, to use in your company.
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