Competition law exists to allow businesses to compete openly and fairly with each other. Breaking competition law can have serious consequences for a business and its directors so it is crucial for leaders to understand the risks. Indeed, the Competition and Markets Authority (CMA) can bring legal proceedings against companies who try to circumvent this law.
The word cartel conjures up images of drug lords, bullets and smuggling. In reality, a cartel can be hiding under cover of seemingly innocuous email exchanges and lunchtime meetings. In simple terms, a cartel is an agreement between business not to compete with each other; usually in secret. A lack of awareness among company directors and senior business people about cartels could result in fines of up to 10% of global turnover, director disqualification or even jail.
What directors need to know
- Make entirely independent decisions. Arrangements between businesses that seek to control competition are likely to be unlawful. While discussing general industry trends may be within the law, avoid discussions where sensitive information could be shared. All commercial decisions should be made independently.
- Consider what to share. Competitors risk entering into an anti-competitive arrangement where they share sensitive information about pricing, production, customers or future commercial intention. Ensuring that staff are properly trained on what is appropriate to discuss with external contacts is vital.
- Encourage a culture of compliance. Directors must take overall responsibility for instilling a culture of compliance and a way to do this is to include competition law as part of risk discussions. Other people in the business will look to you for guidance.
- It is not just large businesses that are at risk. While investigations involving large organizations are quick to make the headlines, never assume that you’re too small to matter and remember: fines will have a larger impact on smaller firms.
The CMA offers competition law guidance material for company directors on its website www.gov.uk/government/organisations/competition-and-markets-authority.