What is competition law?

This is where two or more similar businesses come together and agree what prices to charge. This means there’s less incentive for them to bring their prices down, so customers end up not getting a fair deal. For example:

• Vets in the same area come to an arrangement to charge the same rate for common treatments such as sterilisation and inoculation
• Sports shop owners in the same town agree a price for selling replica kits of the local football team.

This is where two businesses who would normally be competitors, agree to split the market and so avoid the problem of competing with each other. They might divide the market in the following ways:

• Types of customers: e.g. Company ‘A’ agrees to sell to retail customers while Company ‘B’ agrees to sell to consumers
• Geographically: e.g. Company ‘A’ agrees to sell in the north and east of a region while Company ‘B’ agrees to sell in the south and west
• Product or service types: e.g. Company ‘A’ agrees to sell higher priced items while Company ‘B’ agrees to sell lower priced items.

In all these cases customers are disadvantaged though lack of choice.

This practice sometimes goes hand-in-hand with price fixing, resulting in customers being doubly disadvantaged!

Here are other types of behaviours to avoid.

• Sharing commercially sensitive information – this could lead to informal price fixing or market sharing. 
• Abusing a dominant market position – an example would be lowering prices for a period of time to squeeze competitors out of business, and then raising prices once the threat of competition has been removed.
• Forcing retailers to sell at a specific price – If you’re a supplier, it’s okay for you to recommend a retail price to retailers, but it’s unlawful for you to try to prevent retailers selling your items at a lower price, for example by making threats or offering illegal financial incentives.

If you suspect any business or individual of breaking competition law you must contact Competition and Markets Authority (CMA).

If you think that you may have broken the completion law, the authorities strongly encourage you to come forward as you may be granted leniency. If you admit your involvement, stop such behaviours, and fully co-operate with any investigations, financial penalties may be reduced or avoided altogether. Individuals who come forward may be granted immunity from persecution, and directors may avoid disqualification.

What can happen if I break competition law?

• Businesses can be fined up to 10 per cent of their turnover
• Individuals can be sentenced to up to five years in prison and fined
• Company directors can be disqualified for up to 15 years
• Businesses and individuals may bring claims if they’ve suffered losses because of infringements of competition law
• There can be long lasting damage to a business’s reputation

To report suspected violations of competition law, contact the Competition and Markets Authority:

• Cartels Hotline: 020 3738 6888
• Email: cartelhotline@cma.gsi.gov.uk