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Competition law; failing to comply can have serious consequences

27 June 2008

Failing to comply with competition law can have serious consequences. An errant business may face fines of up to 10 per cent of turnover as well as finding that its agreements are unenforceable.

For serious breaches, directors risk disqualification or even criminal sanctions. Clearly it is an area of law businesses need to be aware of if they are to meet their obligations, assert their rights and protect their position, says partner Paul Symes-Thompson.

The aim of both UK and EC legislation is to promote healthy competition. It prohibits anti-competitive behaviour such as agreements between businesses to fix high prices and it makes it illegal for companies to abuse a dominant position. More specifically, you must not agree to fix prices or terms of business with competitors or discriminate between customers, for example by charging different prices or imposing different terms for the same product or service.

The OFT flags up some of the warning signs that a business may be breaking competition law.

They include:

  • a supplier prevents you from selling their products at a discount
  • a long-standing supplier decides, for no apparent reason, to stop supplying you
  • you receive quotes from various suppliers that are surprisingly and unusually similar.

How do you ensure compliance?

A good starting point is to assess the likely impact of competition law on your business and the risk of committing a breach. The higher the risk, the more measures you will need to ensure compliance.

Even if you think the risk of a breach is low, you should still take steps to ensure compliance. One approach is to ensure your employees are at least aware of competition law and the implications of infringement. If they have an understanding of the law, they will also be able to recognise when you might be the victim of anti-competitive agreements or conduct.

Many businesses implement compliance programmes.

These must be applied in conjunction with appropriate policies and procedures. Not only does this minimise the risk of being non-compliant, it also provides evidence that you have a policy. This may be taken into account should you ever be investigated and could, in turn, lead to a reduction in any fine.

Subject to Parliamentary approval, the law protecting consumers against unfair trading is currently being made the same across the EU. This will increase protection for consumers and make it easier for businesses to operate in different member states. It is therefore even more important that businesses stay one step ahead to avoid either potentially severe penalties or adverse publicity.

As always, if you need commercial and pragmatic legal advice, we’re here to help so please get in touch.

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Paul Symes-Thompson MA (Cantab)
Partner
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Paul Symes-Thompson
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