Competition Law - Beware Of Price Fixing

Independent schools and football kit suppliers have something in common. They both hit the headlines breaking the competition law - price fixing of football shirts and illegal sharing of information about school fees.

The competition law is there to prevent anti-competitiveness whether the business is selling products or services and whether it is large or small.

Competition between businesses is good for consumers, providing choice through price and product competition, as well as promoting innovative new products. Competition law prohibits anti-competitive agreements and behaviour which have the aim or effect of restricting, preventing or distorting competition by stifling the development of markets or fixing prices.

Cartels
So what is banned? Agreements between competitors not to compete with each other (also known as cartels) are prohibited. For example two manufacturers of widgets agree that they won’t sell to customers below £10 per unit, or they allocate customers or geographical areas so that they do not have to compete against each other. These sort of arrangements may be informal or unwritten – but are still very much agreements caught by the law.

The law also applies to suppliers or manufacturers selling products or services to their customers (usually retailers).

Although there are limited circumstances in which exclusive arrangements are permissible, generally a supplier cannot force its customer to stock only its products and exclude its competitors.

Abuse of dominant positions
Although as a rule, businesses can do business with who they like, once they supply more than 40% of a product or service the law sees that as a dominant position which could be abused. Being dominant is not a problem, but abusing that dominance is. Businesses in this position must be careful about charging unfair low prices which could squeeze out the competition, or excessively high ones as customers have no where else to go.

Dominant businesses must have good grounds for refusing to supply a customer (like a bad credit rating) and must treat all their customers in a fair non discriminatory way. Even small markets have major players – so this is not the preserve of big players.


Consequences for businesses engaging in anticompetitive behaviour can be huge in both time and money. The Office of Fair Trading, the competition watchdog, can fine up to 10% of worldwide turnover, impose criminal sanctions and disqualify directors. Consumers or competitors could start court proceedings for damages – as has happened with the overpriced football shirts case. The OFT will also publicise bad behaviour – which is not good publicity.

And how do the OFT find out? Usually from complaints from disgruntled customers or competitors – sometimes even the ones involved with you in anti-competitive behaviour who could benefit from whistle-blowing.

So how do you make sure that you comply with the law?
• Question your employees about their relationships with your competitors and suppliers.
• Train them to know how far they can go with agreements with suppliers, customers and competitors.
• Review your agreements (and those of your suppliers) – could they be anti-competitive?

If you have an anti-competitive agreement it may not be enforceable, and so you might not have the protection you sought.

How can you afford not to comply?

Contact Rachel Robinson on 01392 685351 for further information or email: rachel.robinson@foot-ansteys.co.uk