Many businesses try to profit from gaining an unfair competitive advantage. Here are eight costly examples of what happens when you breach UK competition law.
The consequences of breaking UK competition law can be severe. Your business could be fined as much as 10% of global turnover and your directors could be banned from running a company for up to 15 years. In the most serious cases, individuals could even go to prison for up to 5 years.
The nation’s Competition and Markets Authority (CMA) takes all reported cases of anti-competitive behaviour very seriously, and has demonstrated time and again that it will go to great lengths to crush business cartels for good, no matter their size or range of influence.
1. Price-fixing - not 'real' estate at all
Somerset Estate agents fined £370,000
The CMA uncovered a Somerset-based price-fixing cartel involving a group of six estate agents in 2017. They had agreed amongst themselves to keep their commission rates above 1.5% when selling residential properties, aiming to “drive the fee level up” and make “as much profit as possible”.
As a result of their agreement, local homeowners were denied the best deal when selling their properties and ended up paying artificially high fees. Eventually, one of the agents involved confessed to the CMA and was spared a fine under their leniency policy. However, for failing to comply with UK competition law, the other five shared a fine of £370,000!
2. Resale price maintenance - shining a light on price-fixing
National Lighting Company fined £2.7m
A domestic light fitting supplier was fined a jaw-dropping £2.7 million for breaking competition law. The National Lighting Company Limited (NLC) was caught engaging in resale price maintenance by setting a maximum discount that resellers could offer against the RRP.
A recording brought before the CMA shows one reseller asking about the legality of price-fixing, with the NLC representative’s response being: “It is illegal to fix prices. That’s why we won’t put anything in writing.” The supplier sought to hide these agreements within Internet Licence Agreements but were ultimately unsuccessful.
3. Cartel activity - building a case
Thomas Armstrong (Timber) & Hoffman Thornwood fined £2.8 million
Two British furniture component suppliers were collectively fined £2.8 million for engaging in cartel activity. The companies admitted to agreeing not to compete on price and dividing a list of customers for them to supply to avoid a ‘price war’.
After the CMA received an anonymous tip-off, they opened an investigation into the matter, and a search of one of the premises uncovered a handwritten list of a rival’s furniture components inside a senior worker’s desk. It is the involvement of such senior members of staff which caused the fine for this breach of competition law to be so enormous.
4. Price-fixing - getting in deep water
Franklin Hodge Industries, Galglass & KW Supplies fined £2.6m
Back in 2016, a group of leading UK water tank suppliers were collectively fined more than £2.6 million for breaching competition law. At the time, there were a mere four primary suppliers of a particular kind of tank in the UK.
Between 2005 and 2012, representatives from the four companies met in secret to fix tank prices, rig contract bids and split customers amongst themselves. Eventually, CST Industries (UK) Ltd reported the affair to the CMA and was granted immunity under their leniency policy. For partaking in cartel activity, Franklin Hodge received a fine of £2,015,135, Galglass £587,926 and KW Supplies £22,248.
5. Rigging competitive tenders - burning money
Fuel Express & CPL fined £3.4m
Two of the UK’s leading bagged household fuel suppliers were fined a whopping £3.4 million in 2018 after being found guilty of rigging competitive tenders to some of the nation’s largest supermarkets.
Evidence gathered by the CMA shows that each time one of these suppliers received an invitation to tender from an existing customer, they would email the other to ensure that they did not send a more competitive price, thereby maintaining the status quo which was safe and favourable for both suppliers.
6. Cover bidding - fitting up businesses
Five office design & fit out companies fined £7m
In what is by far the harshest punishment on this list, five office design and fit-out companies have been fined a staggering £7 million between them after being found guilty of cover rigging. The cover bids in question affected 14 separate contracts between 2006 and 2017, with clients involved including an East London college, a low-cost airline, and a City law firm.
On each occasion, the company wanting to win would inform the other firms of the price they should quote, and even provided other bidders with detailed design plans to send as their own.
Five companies received fines for their involvement:
- Fourfront: £4,143,304
- ThirdWay: £ 1,780,703
- Loop: £1,090,816
- Oakley: £58,558
- Coriolis: £7,735
7. Price-fixing - in the frame
Trod Limited fined £160,000
Another interesting price-fixing case involves the use of sophisticated technology to effectively establish a cartel. Two online sellers of frames and posters, GB eye Limited and Trod Limited, were competing vendors on the Amazon UK until they struck a shady deal to avoid undercutting each other’s prices unless another seller had the same product listed for a lower price.
During their investigation, the CMA found that one of GB eye’s internal emails stated that “Trod…have agreed not to undercut us on Amazon and I have agreed to reciprocate. We will therefore be aiming to be the same price wherever possible, put prices up and share the sales.” To make their lives easier, they used automated re-pricing software to carry out their crimes. GB eye eventually reported the cartel to the CMA, leaving Trod to face a £160,000 fine alone.
8. Reducing competitive pressure - printing money
Three estate agents & a newspaper publisher fined £735,000
Castles, Hamptons Estates, Waterfords (Estate Agents), Three Counties (trade association) and Trinity Mirror Southern (publisher) were fined for a breach of competition law.
The association prevented its members advertising their fees or discounts in a local newspaper. So far so good, but the association then took it a step further and agreed with the publisher to extend this ban to all estate agents, even those not part of the association. Not only did this act affect the business of rival estate agents, but it was also very unfair to consumers.
Notably, two of the companies got a further reduction by committing to put in place specific compliance measures to help prevent them from breaking competition law in future.
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