Business Law: Competition law applies to small firms too, warns Victoria Judge of Gotelee Solicitors

YOU might think that competition law only applies to large business and does not affect your business. But you might be wrong.

Whenever your business deals with its competitors, there are competition law issues that you need to consider.

Competition law applies to all companies and is designed to ensure that companies compete fairly with each other. Failure to comply can have serious implications for your business, including large fines. Certain serious breaches of competition law may also expose an individual to the risk of criminal prosecution. Businesses can also be exposed to claims that may exceed any fines imposed on them.

All forms of cartel activity are strictly prohibited regardless of the size of your business. A “cartel” describes any organisation or arrangement between at least two competitors that is designed to reduce competition between them and so increase prices or profitability beyond the level that could be achieved competitively. The main examples of cartel activity are:

n Price fixing. Any understanding or agreement about price levels or increases can constitute price fixing. Even a statement to a competitor like “we intend to increase prices next year”, can constitute unlawful price fixing.

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n Bid rigging. This is when companies agree the outcome of a tender or pitch process amongst themselves. Bid-rigging eliminates fair competition from the process, removes the customer’s free choice and will almost certainly lead to the customer paying higher prices.

n Market sharing. This may involve an agreement to allocate particular customers or sales territories to individual cartel members.

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Your business must not agree to share confidential or commercially sensitive information with competitors such as prices, customers or sales information.

Some forms of information exchange may be permissible, for example if the information provided has no value in predicting future commercial behaviour, or is anonymised, aggregated, etc.

Sales or production quotas are often used to control the market position of cartel participants and maintain artificially high prices.

To be safe, always take legal advice before any co-operation with competitors that may reduce competition and breach competition law. Competition law is easy to fall foul of. If you become aware that your business is involved in any cartel activity, or you are approached by a competitor to participate, you should take legal advice immediately.

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