Competition law fines in 2020 did not reach the billion-dollar heights of earlier years. But the penalties were still huge. We explain what went wrong.
Biggest competition law fines of 2020
- Google - £109m - Abuse of dominant position
- Teva & Cephalon - £51.9m - Pay-for-delay agreement
- Compare the Market - £17.9m - Most favoured nation
- Apotex - £17.4m - Price-fixing
- NBCUniversal - £16.7m - Cross-border trade barriers
- Kiekert & Brose - £15.4m - Cartels
- Roland & Korg - £5.5m - Resale price maintenance
- Fender Europe - £4.5m - Price-fixing
- Four UK drugs firms - £3.4m - Quantity & price-fixing
- Key Takeaways
If you're interested in this year's penalties, see Competition Law Fines 2021
Biggest competition law fines of 2020 in detail
1. Google - £109m - Abuse of dominant position
In January 2020, the French competition watchdog fined Google $150m for abusing its dominant position in the online search advertising market.
It criticised the tech giant for its "brutal and unjustified" suspension of accounts, "opaque and difficult to understand operating rules" relating to Google Ads and for applying them in "an unfair and random manner" after complaints by firms that had their accounts suspended without warning.
Google planned to appeal, insisting that "People expect to be protected from exploitative and abusive ads, and this is what our advertising policies are for".
But, while agreeing that customer protection is "perfectly legitimate", the watchdog cautioned, "Google cannot suspend the account of an advertiser on the grounds that it would offer services that it considers contrary to the interests of the consumer while agreeing to reference and accompany on its advertising platform sites that sell similar services".
Google previously received a €1.5bn EU competition fine in March 2019.
2. Teva & Cephalon - £51.9m - Pay-for-delay agreement
The European Commission fined Cephalon and Teva, two pharmaceutical giants, a total of €60.5 million for their agreement to delay for several years the market entry of a generic version of Modafinil, Cephalon's drug for sleep disorders, after Cephalon's original patents had expired.
Interestingly, this agreement had been concluded well before Cephalon became one of Teva's subsidiaries. Such an agreement is in direct violation of EU competition law and has caused substantial harm to EU patients and healthcare systems by keeping Modafinil prices artificially high.
Executive Vice-President Margrethe Vestager, head of competition policy, said that "It is illegal if pharmaceutical companies agree to buy-off competition and keep cheaper medicines out of the market. Even when their agreements are in the form of patent settlements or other seemingly normal commercial transactions. Teva's and Cephalon's pay-for-delay agreement harmed patients and national health systems, depriving them of more affordable medicines."
3. Compare the Market - £17.9m - Most favoured nation
The Competition and Markets Authority (CMA) fined Compare the Market £17.9 million after discovering that certain clauses in company contracts with home insurers breached UK competition law. The CMA investigation concluded that Compare the Market was in breach of competition law over a period of two years by imposing wide 'most favoured nation' clauses on home insurance providers making sales through its platform.
These clauses effectively prohibited home insurers from lowering their prices on other platforms. Additionally, these restrictions made it more difficult for Compare the Market’s competitors to grow and challenge the company's dominant market position as other price comparison websites were effectively rendered unable to beat it on price.
Consequently, competition among price comparison websites and competition among home insurers selling such platforms was limited. The CMA ruled that this is likely to have resulted in increased insurance premiums.
4. Apotex - £17.4m - Price-fixing
Drug company Apotex has admitted price-fixing and agreed to pay $24.1 million following a Department of Justice (DoJ) investigation.
The US regulator said Apotex fixed the price of Pravastatin, a generic cholesterol medication, between May 2013 and December 2015 and worked with others to keep the drug's price artificially high.
As part of the agreement, it has also agreed to "cooperate fully" with the DoJ's ongoing antitrust investigations into some of the generics market leaders. The regulator has already reached agreements with Heritage Pharmaceuticals, Rising Pharmaceuticals and a former Novartis executive.
5. NBCUniversal - £16.7m - Cross-border trade barriers
The European Commission has fined NBCUniversal and other Comcast companies €14.3 million for illegally restricting traders from selling licensed merchandise within the EEA beyond those customers and territories allocated to them.
The investigation found, for example, that a department store in Spain couldn't sell ET pyjamas from a Belgian manufacturer because that manufacturer was banned from selling into Spain.
The restrictions affected hundreds of merchandising products from Minion school bags to Shrek mugs, Jurassic Park toys and sweets, beginning in 2013 when NBCUniversal ramped up its licensing activities in Europe. It abruptly ended in September 2019 when, faced with the EC's investigation, it informed all its European licensees that the anti-competitive restrictions ceased to apply.
Since May 2017, firms including Guess, Nike and Sanrio have been fined €187 million for imposing similar cross-border trade barriers.
6. Kiekert & Brose - £15.4m - Cartels
Car part suppliers Kiekert and Brose have been fined a total of €18m by the European Commission for their involvement in two cartels concerning the supply of closure systems for vehicles in the European Economic Area. A third firm, Magna, was also involved but was spared a fine as they were the ones who revealed the cartels to the EC.
Magna, based in Canada, and Kiekert, based in Germany, took part in a bilateral cartel concerning the supply of strikers and latches to the Daimler group and BMW group. At the same time, Magna was part of a separate cartel with the German firm Brose, which concerned the supply of window regulators and door modules for a car model owned by the Daimler group. All three firms owned up to being part of the respective cartels and agreed to settle the case.
The EC's executive vice-president, Margrethe Vestager, said, "Components such as door modules, window regulators and latching systems are essential for the proper functioning of cars. They provide protection against injury and ensure safety and comfort. The three suppliers colluded to increase their profits from the sale of these components. These cartels ultimately hurt European consumers and adversely impacted the competitiveness of the European automotive sector."
7. Roland & Korg - £5.5m - Resale price maintenance
The latest musical instrument firms to get into trouble with the Competition and Markets Authority (CMA) are the industry giants Roland and Korg, who have just been fined a combined total of £5.5 million for online price-fixing.
A CMA investigation found that both firms had breached competition law by restricting online discounts, in a practice known as 'resale price maintenance'. As a result, Korg was fined £1.5 million, while Roland was given a £4 million penalty.
CMA research revealed that more than 40% of musical instrument sales take place online, "so it’s important that manufacturers and retailers do not illegally work together to keep prices high."
8. Fender Europe - £4.5m - Price-fixing
From Jimi Hendrix and Eric Clapton. To Taylor Swift, Nile Rodgers and Oasis' Noel Gallagher. Fender is the guitar of choice for some of the world's most famous musicians, with limited edition models costing around £45,000.
But, the firm found itself in a "jam" of a different kind. The UK arm of the legendary guitar manufacturer Fender Europe was fined £4.5m by the UK's Competition and Markets Authority for illegal price-fixing.
Between 2013 and 2018, Fender prevented online discounting of its guitars - meaning customers who shopped around online to find the best deal struggled as prices were roughly the same.
- Fender also pressurised retailers to raise online prices when tip-offs were received about others not holding the line.
- Some employees deliberately concealed misconduct by recording as little as possible in writing. The company was fined £25,000 when a senior manager at its head office hid notebooks during a CMA inspection.
Andrea Coscelli, the CMA's chief executive, said, "Quite simply, this behaviour is against the law. The fact the CMA has imposed large fines on major musical instrument firms Casio and Fender in a matter of months should be a lesson to this industry and any other company considering illegal behaviour."
It was one of the largest fines ever imposed for resale price maintenance (RPM) and would have been £14.2 million had the firm not admitted the offence under the CMA's leniency rules.
9. Four UK drugs firms - £3.4m - Quantity & price-fixing
Four drugs companies were fined over £3.4m for breaching competition law.
King and Auden Mckenzie agreed that one of them would only supply 10mg tablets of the anti-depressant nortriptyline, while the other would only supply it in 25mg tablets. They also fixed quantities and prices. Accord-UK Ltd took control of Auden Mckenzie's Nortriptyline business, so they were held responsible for its illegal conduct. The CMA fined Accord-UK Ltd £1.9m and King £76k for market sharing.
King, Alissa and Lexon also exchanged competitively sensitive information on prices, volumes and entry plans to keep the drug's price artificially high. The three firms were fined £76k, £175k and £1.2m, respectively.
Geoff Steadman of the CMA said, "If pharmaceutical companies get together to restrict competition for the supply of a drug, this can lead to the NHS - and ultimately the UK taxpayer - paying over the odds for what are often essential medical treatments".
King and Auden Mckenzie also agreed to pay £1m to the NHS in connection with the case. It was the second time the CMA has secured such a payout.
Key takeaways - What to avoid...
- Never discuss or enter into agreements with competitors - regarding prices, margins, market shares or production volumes.
- Never discuss future pricing plans and promotions with suppliers - or discuss RRPs with retailers.
- Don't impose price, territorial or online sales restrictions on suppliers or distributors - unless you are certain that it is legally permissible to do so in that instance.
- Don't act in a way that restricts competition in markets where you enjoy a dominant position - by, for instance, refusing to supply, prohibiting discounting, imposing exclusive obligations or entering "pay-for-delay" deals.
- Don't discuss anything that is commercially sensitive with competitors - including prices, markets, territories, strategies or - as it is illegal.
- Don't restrict consumer choice by engaging in anti-competitive behaviour - internet shopping should give consumers more choice, not less, to buy products cross-border.
- Always be aware of anti-competitive risks - these include having competitors who are also your customers and staff that regularly move between businesses in the same sector.
- Understand which conversations are off-limits when meeting competitors - this means no discussing prices or fees, discussing (carving up) customers or territories, or colluding to agree on rules that are not in the interests of consumers.
- Don't abuse a dominant market position - never 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.
- Don't place price, territorial or online sales restrictions on suppliers or distributors - unless you are certain that it is legally permissible to do so.
- Don't underestimate the far-reaching powers of the regulator - the CMA recovered emails and texts from IT servers to prove illegal behaviour. There is simply no place to hide.
Key Takeaways - What to do…
- Get the "tone from the top" right - one bad apple can undermine your entire compliance regime.
- Encourage your team to spot red flags and report potential misconduct quickly - as the first company to report anti-competitive behaviour may escape prosecution under leniency rules. If you don't speak out, a rival will be only too happy for you to "take the rap".
- Spot and react to price-fixing red flags - If you find yourself in a trade meeting where anti-competitive practices are discussed, have your objections minuted (if possible). Make your excuses and leave promptly, then report it immediately.
- Be proactive - speak out if you witness anti-competitive behaviour or collusion in meetings. If you don't, others will.
- If you make a mistake, it may be best to own it and move on - cooperation with the regulator can substantially reduce the size of the fine.
- Prepare for dawn raids - are you confident employees know what to do in the event of a CMA investigation? That there will be no shredding of evidence. No entering sealed rooms…
Competition law advice
Check out the latest CMA guidance - some of the rules on coordinated action were relaxed during the pandemic, but others most definitely have not.
If you have anti-competitive concerns, report them to the UK's CMA cartel hotlines.
For confidential guidance, if you have been directly involved in anti-competitive behaviour, you can call +44 (0)20 3738 6833.
If you've seen price-fixing take place, you can report it on +44 (0)20 3738 6888.
Remember, if you speak up first, you may avoid sanctions.
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