Starting your own business is incredibly exciting and will present you with plenty of new opportunities and challenges to overcome. But one challenge that doesn\u2019t excite some business owners is the idea of competition. Let\u2019s face it: no matter what your business does, who you\u2019re selling to, or where you\u2019re operating from in the world, the chances are you\u2019ll have competition.<\/p>\n
Generally speaking, competition is good for business, the consumer and the marketplace. Why? Because it forces companies to innovate and deliver bigger, better and more efficient goods or services – for less.<\/p>\n
When companies do better, everybody benefits, and that\u2019s one of the key foundations of the UK\u2019s thriving business sector.<\/p>\n
That being said, there are instances where companies are so frightened of the prospect of competition or failure, they strike some form of agreement not to compete with one another. Although that might sound like a great idea to some company owners, the vast majority of this type of anti-competitive behavior is actually illegal in the UK.<\/p>\n
To help you understand why anti-competitive activity is illegal, as well as the legal repercussions if you\u2019re found to be in breach of those laws in the UK, we\u2019ve compiled a comprehensive guide explaining everything you need to know about anti-competition law.<\/p>\n
Before delving into the law itself and the penalties you could face for non-compliance, it\u2019s worth looking into what anti-competitive activity actually is.<\/p>\n
The UK Government identifies most anti-competitive business activity as being under one of two categories:<\/p>\n
When you agree not to compete with one or more businesses in certain ways, this is often referred to as a \u2018cartel.\u2019 The businesses involved in a cartel could be any size, including just one shareholder or director<\/a>, and UK Government rules on cartels cover all of the following:<\/p>\n Price fixing is a practice in which two or more companies strike an agreement not to sell goods or services below a certain price or rate.<\/p>\n Bid rigging\u00a0is a practice that sees two or more companies or parties collude to choose the winner of a\u00a0bidding\u00a0process for work or a contract, often from a pool of uncompetitive bids.<\/p>\n Market sharing is when two or more companies that would ordinarily compete, strike an agreement to divide customers or allocate a predefined market share, group of suppliers or geographic area (as opposed to making independent decisions concerning where they should operate, who to source from, and which customers they would like to actively pursue).<\/p>\n Sharing any sort of commercial information that could reduce competition between your company and its competitors is also illegal in most instances.<\/p>\n We\u2019ll explore each of these activities in-depth in just a minute \u2013 but first, you should note that an agreement to conduct any of the above activities does not need to be in writing for it to count as being illegal.<\/p>\n 5 things you need to form a limited company<\/span><\/a>\n \n Any informal conversation or so-called \u2018gentleman\u2019s agreement\u2019 with another business could also be in breach of anti-competition law, even if that agreement is never carried out.<\/p>\n You\u2019re not allowed to discuss the prices you currently or are planning to charge your customers or clients with any of your competitors. According to the UK Government, your business will likely be in breach of anti-competition law if you discuss any of the following information about pricing with other companies operating in your industry sector:<\/p>\n You\u2019re not allowed to discuss any bids for a contract tender you have issued or are taking part in with your competitors. \u00a0According to the UK Government, your business will likely be in breach of anti-competition law if you discuss any of the following information about bids or contract tenders with other companies operating in your sector:<\/p>\n You\u2019re not allowed to discuss or agree with other businesses to share markets or customers. This includes, among other activities, dividing customers, allocating a predefined market share, dividing suppliers or splitting a defined geographic area with your competitors.<\/p>\n According to the UK Government, your business will likely be in breach if you discuss any of the following information about market sharing with other companies operating in your industry space:<\/p>\n You\u2019re not allowed to discuss or agree with other businesses to share information that might reduce competition between your companies.<\/p>\n In line with UK law, your business will likely be in breach if you discuss information about any of the following topics with other companies operating in your sector:<\/p>\n You should note that the above parameters include sharing information with another company via a third party, for example through a trade association or some sort of industry body.<\/p>\n In addition to the activities we\u2019ve already covered above, your company is also likely to be in breach of anti-competitive law in the UK if you are considered to be abusing a dominant market position.<\/p>\n For reference, your business is considered to command a dominant position over a particular market if it claims a market share of 40% or more, and it is not affected by normal competitive restraints. So, how could your company be in breach of such an enviable position?<\/p>\n What is the Business Asset Disposal Relief scheme, and is my business eligible?<\/span><\/a>\n \n Examples outlined by the UK Government in terms of a potential breach include activities that are considered unfair to your customers or to other businesses, including:<\/p>\n There are a few other rules covered by UK law that would be considered in breach of anti-competitive law.<\/p>\n These include laws against:<\/p>\n If you or your business are found to be involved in any sort of anti-competitive behaviour, it could spell financial ruin for you and your company.<\/p>\n Under UK law, your business can be fined up to 10% of its worldwide turnover. It can also be sued for damages. Meanwhile, you can be personally fined or sent to prison for a period of up to five years if you are found guilty of having been involved in any sort of illegal cartel activity.<\/p>\n Company shares \u2013 paid, unpaid and partly paid<\/span><\/a>\n \n Likewise, company directors can be disqualified from acting as a director<\/a> for a period of up to 15 years if they are deemed to have been in breach of anti-competition laws.<\/p>\n It\u2019s also important to bear in mind that your business can still be penalised or sued for damages if it is found to be in breach \u2013 even if senior managers did not know anything about the illegal activities in question.<\/p>\n Simply put, any type of anti-competitive activity is illegal \u2013 and so if you want to avoid being penalised, you need to avoid these types of activities. As a business owner, it is your responsibility to ensure that your company is not breaking competition law.<\/p>\n That means you need to manage the risks associated with non-compliance, and that management task begins with first identifying whether your business is at risk of non-compliance.<\/p>\n As a point of reference, your company is likely to be more at risk if you or your employees have any sort of contracts with your competitors, or any of your employees regularly move to or from jobs with some of your competitors or other companies operating in your industry sector. Likewise, any partnerships with competitors such as joint buying agreements or long-term exclusive contracts with customers or suppliers could place your business at risk.<\/p>\n Our confirmation statement service - never miss another filing deadline<\/span><\/a>\n \n And above all else, any business that commands a dominant market position should be aware of the potential risks they face as a large market player.<\/p>\n After identifying existing or potential risks of non-compliance, it\u2019s your responsibility as company owner to set up policies, guidelines and training to make sure that all employees and stakeholders know what anti-competitive activity is, how to avoid it and how to report it.<\/p>\n It\u2019s also worth noting that if you are worried your company currently is or has engaged in the past with any type of anti-competitive activity, the UK Government offers a Competition Pro Bono Scheme you can contact for free and independent advice. Their experts will be able to advise you of your rights, obligations and ways forward.<\/p>\n You and your employees should report anti-competitive activity wherever appropriate, and the way in which you are expected to report this illicit activity depends upon a few factors.<\/p>\n If you believe the rights of you or your business are being infringed upon by a cartel, you should contact the Competition Markets Authority (CMA) cartels hotline<\/a>. In some cases, you may receive a financial reward in exchange for information provided that leads to an investigation.<\/p>\n Likewise, you may be treated with a degree of leniency if you report a cartel you have been involved with in the past.<\/p>\n Any other type of anti-competitive activity should be reported to the CMA via this notification form<\/a>, which you should then submit to the following email address: general.enquiries@cma.gsi.gov.uk<\/a>.<\/p>\n Alternatively, you are encouraged to report anti-competitive activity to the relevant industry or regulatory body responsible for your industry space.<\/p>\n At the end of the day, anti-competition law in the UK is extremely serious, and you should not mess around with your future or the future of your company by getting involved in illicit activity. There are certain instances in which you or your business may have taken part in some of these activities without knowing they were illegal \u2013 or perhaps you\u2019re hovering about in a grey area that you are unsure about.<\/p>\n When in doubt, or if you are concerned, you should always consult a legal expert for comprehensive and professional advice. If you do not have appropriate legal representation with knowledge about anti-competitive activity, you may wish to contact the government\u2019s free Competition Pro Bono Scheme or your relevant industry or regulatory body for guidance.<\/p>\n What is GDPR and how will it affect my company?<\/span><\/a>\n \n Just remember, although it sounds nice to live in a world without business competition, trying to avoid that competition could land your business in hot water. Try to embrace the spirit of competition, learn from other businesses and use those lessons to make your company better.<\/p>\nPrice fixing<\/h4>\n
Bid rigging<\/h4>\n
Sharing markets or customers<\/h4>\n
Sharing commercially sensitive information<\/h4>\n
What counts as price fixing?<\/h3>\n
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What counts as bid rigging?<\/h3>\n
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What counts as market sharing?<\/h3>\n
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What counts as information sharing?<\/h3>\n
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How do I know if my company is abusing a dominant position?<\/h3>\n
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Are there any other types of anti-competitive activities my company is not allowed to do?<\/h3>\n
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What happens if my company gets caught carrying out anti-competitive activity?<\/h3>\n
How can my business avoid being penalised?<\/h3>\n
How do I report anti-competitive activity?<\/h3>\n
The bottom line<\/h3>\n