The object of competition laws is to prohibit agreements or behaviour that damage competition in the UK market.
Whether a particular practice infringes the competition rules will often depend on the market share of the parties involved and conditions in the market at issue.
The importance of competition compliance
Competition compliance is how companies make sure that they comply with the legal rules which are designed to ensure that competition within the UK is not restricted.
Under the Competition Act 1998, there are prohibitions on anti-competitive agreements and abusive conduct by dominant businesses. These are closely modelled on Articles 101 and 102 of the Treaty on the Functioning of the European Union (TFEU). Whereas the EU competition rules will apply where an agreement or conduct affects trade between EU member states, the UK competition prohibitions will apply where the effect is mainly on trade within the UK.
The Enterprise Act 2002, as amended by the Enterprise and Regulatory Reform Act 2013, makes it a criminal offence for individuals to enter into an agreement relating to a company’s involvement in a price-fixing, market-sharing, bid-rigging or production-limiting cartel.
Consequences of non-compliance
Failure to comply with competition rules can have an extremely high financial cost. The Competition and Markets Authority (CMA) can impose fines of up to 10% of an undertaking's turnover worldwide. In addition to the risk of large fines, compliance with competition rules is vital for the following reasons, among others:
- Agreements that infringe competition laws may be wholly or partially invalid, which means that the company cannot enforce them.
- Third parties who suffer loss as a result of anti-competitive behaviour may bring an action for damages or, in appropriate cases, an injunction in the civil courts.
- Investigations into the company and findings of infringements usually give rise to adverse media comment and reputational damage with customers and investors.
- Investigations and possible legal proceedings resulting from infringements can take years to resolve, leading to high costs and taking up management time that should be devoted to more profitable projects.
- Increased risk of further complaints against the company and ongoing surveillance by the competition authorities.
The Enterprise Act 2002, as amended by the Enterprise and Regulatory Reform Act 2013, introduced two new legal risks for individuals:
- It is a criminal offence to enter into certain “hardcore” cartel arrangements.
- Directors of companies that have infringed UK or EU competition law face potential disqualification as a director.
It is strongly advisable to complete a contact report (see ‘Appendix’ below) after each meeting that you have with competitors, suppliers, or major purchasers (such as distributors, agents, or any other purchasers whose contracts are significant. The report should consist of a brief record of the meeting, including a note of any potentially anti-competitive behaviour on the part of the company with whom you have met. You must keep a copy on your file.
Contact reports may help to demonstrate that the company has not acted in breach of competition rules if your conduct is subsequently called into question. They may also help in establishing that a competitor has committed a breach of the competition rules and provide useful evidence if the company decides to complain to the competition authorities about that competitor’s behaviour.
Further advice and informationIf you suspect that there has been an infringement of competition law and compliance, you should promptly report the incident to group legal/group compliance or your manager. If you have any queries or are uncertain whether competition laws may apply to specific activities, you should contact in-house counsel.
Contact report form
- Date of meeting/conversation:
- Venue (if a meeting):
- Organisation name:
- Name of contact and job title:
- Purpose of meeting/conversation:
- Summary of what was discussed: