There is a fine line between a healthy level of competition and anti-competitive behaviour. Crossing that line can cause significant financial and reputational damage to your company.
Biggest competition law fines in 2022
- Mastercard - £31.5m - Anti-competitive agreement
- Focus - £15.5m - Anti-competitive agreement
- JD Sports - £4.3m - IEO breach
- Facebook - £1.5m - IEO breach
Anti-competitive agreements and breaches in Initial Enforcement Orders (IEO) have been a thorn in the side of regulators this year. The UK Payment Systems Regulator (PSR) and the Competition & Markets Authority (CMA) have not held back when issuing fines. After its first cartel decision, the PSR dished out £33 million in fines.
Biggest competition law fines of 2022 in detail
1. Mastercard - £31.5m fine
The PSR has fined Mastercard £31.5 million. Four other companies were fined alongside the financial services company, including allpay, Advanced Payment Solutions (APS), Prepaid Financial Services (PFS) and Sulion, for breaching competition law. In total, the companies were fined £33 million.
The PSR, which regulates the £81 trillion payment systems industry, found that the five companies had agreed not to compete in the prepaid cards market. Upon investigation, the PSR found that the five companies had an agreement not to target or poach one another's clients while acting as part of The National Prepaid Cards Network.
These five companies essentially formed a market sharing cartel. Furthermore, the PSR found that the companies had colluded to allocate potential public sector customer contacts. This cartel behaviour is particularly serious since it reduced competition and choice for local authorities who could have found cheaper, better-quality products.
2. Focus - £15.5m fine
The CMA has fined four pharmaceutical companies and a private equity firm over £35 million, with Focus on the receiving end of the largest fine amount. Focus'fine of £15.5 million is nearly double that of the other four companies fined, Medreich, Alliance and Lexon.
The UK's watchdog found that these pharmaceutical companies agreed to limit the supply of an anti-nausea drug, Prochlorperazine, to the National Health Service (NHS). This action caused the price of the drug to rise by 700%.
The investigation revealed that Alliance had appointed Focus as its distributor, with Lexon and Medreich earning a share of the profits in return for agreeing not to compete in the supply of this drug.
The CEO of the CMA stated that "these firms conspired to stifle competition in the supply of this important medication so that the NHS – the main buyer of the drugs – lost the opportunity for increased choice and lower prices."
3. JD Sports - £4.3m fine
After the CMA blocked the £90 million merger between JD Sports and Footasylum due to competition concerns, JD Sports was fined £4.3 million due to breaching the Initial Enforcement Order (IEO). Footasylum was also fined a lesser amount of £400 thousand.
The IEO breach is related to the reporting and prevention of 'commercially sensitive information' (CSI) disclosure. Furthermore, the companies failed to have proper safeguards in place to notify the CMA. In response to the fines, JD Sports that it had "always acted honestly and in good faith" to comply with the IEO.
4. Facebook - £1.5m fine
Following the CMA's decision to fine Facebook (now known as Meta) £50.5 million for repeated failures to comply with the terms of an IEO, they have been fined another £1.5 million for breaches of the same IEO.
The reason being the company had failed to disclose any material business changes to the CMA. This failure includes not informing the CMA of the resignation and departure of key staff when Meta was obligated to do so. Furthermore, the company failed to meet its obligation to seek the CMA's written consent before such departures and subsequent rehiring.
What can we learn from these fines?
- Refrain from acting to restrict competition in markets where you enjoy a dominant position, such as refusing to supply or limiting the supply of a product.
- Any company subject to an investigation must be fully aware of its obligations and diligent in carrying them out.
- Never discuss or enter into agreements with competitors regarding prices, margins, market shares or production volumes.
- Don't exchange commercially sensitive information with another company without CMA consent, even if the intention is to merge with that company.
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