COMPETITION LAW POLICY

Anti-competitive agreements

 

The Competition Act 1998 (the Act) prohibits anti-competitive agreements between businesses.

 

Any agreement that prevents, restricts or distorts competition is covered (not just the types of agreement listed above). An agreement could be formal (such as legally-binding contracts) or informal (such as unwritten ‘gentlemen’s agreements’). The Act mainly applies to agreements between businesses with a significant combined market share. But even the smallest businesses need to avoid getting involved in anti-competitive agreements, such as cartels. The OFT can also assess whether an agreement may affect trade between EU member states.

 

Price Fixing

 

You’ll be breaking the law if you agree with another business:

 

• to charge the same prices to your customers

• to offer discounts or increase your prices at the same time

• to charge the same fees to intermediaries, for example retailers selling your products

 

Bid Formatting     

 

You cannot discuss bids for a contract tender with your competitors. Bid rigging includes:

• agreeing with your competitors how much you’ll bid for a contract or share information about your bid

• taking turns to win contracts

• asking other businesses to bid when they do not want the contract (called ‘cover bids’)

• paying other businesses not to bid or when you win a tender

• agreeing with other businesses not to bid or to withdrawing your bid

 

Market Sharing

 

You cannot agree with other businesses to share markets or customers. You’ll be breaking competition law if you agree with another business:

 

• not to approach each other’s customers

• not to compete with them for customers, for example in specific locations

 

Sharing Information

 

You cannot share information with other businesses that might reduce competition between you, for example information about:

 

• prices

• production

• your suppliers, customers or contractors

• the markets you sell or plan to sell to

This includes sharing information through a third party, for example a trade association.

 

Abusing a Dominant Position

 

Your business might have a ‘dominant position’ in the market if:

• it has more than a 40% market share

• it’s not affected by normal competitive restraints

 

You might be abusing your dominant position if you’re unfair to your customers or other businesses, for example you:

 

• treat customers differently, for example by offering different prices or terms to similar customers

• make customers buy products they do not want, for example forcing them to take warranties for electrical products

• charge low prices that do not cover your costs so you drive out competitors

 

If you think you have a dominant market position, get legal advice or contact the Competition Pro Bono Scheme to find out what you can and cannot do.

 

Other anti-competitive activities

 

You must avoid other activities that break competition law, e.g.:

• buying or selling jointly with your competitors

• agreeing with your competitors to reduce production of something to raise its market value

• restricting how much other businesses can sell your product for

• agreeing with your competitors not to sell to certain customers or deal with certain suppliers

• having long-term exclusive contracts with any customers or suppliers