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Stay away from cartels!

30 January 2014

The Office of Fair Trading (OFT) is the body responsible for the public enforcement of Chapter I of the Competition Act 1998, which prohibits cartels and anti-competitive agreements. Infringements are backed up with penalties of up to 10 per cent of global worldwide turnover. 

The OFT is now into the last few months of its existence, before it is replaced by the Competition and Markets Association (CMA).  However, this has not prevented it from issuing a series of infringement decisions against alleged cartel activity in the UK.

On 6 December 2013, it announced that it had decided that four suppliers of access control and alarm systems to retirement properties have breached the Chapter I prohibition of the Competition Act 1998.

It imposed fines totally £53,410 on three of the companies, with the fourth, Cirrus, receiving immunity under the OFT's leniency policy. The OFT found that the companies engaged in a number of collusive tendering arrangements, affecting at least 65 tenders.

Specifically, Cirrus, entered into various separate collusive tendering arrangements with each of the other three companies whereby they would submit higher bids than Cirrus, with the aim that Cirrus would win the contracts.

On 12 December 2013, the OFT announced the conclusion of an investigation into a market sharing agreement between Lloyds Pharmacy Limited, Quantum Pharmaceutical Limited and Total Medication Management Services Limited. 

Under this arrangement, the parties agreed not to supply prescription medicines to each other's existing care home customers. Lloyds Pharmaceutical Limited, which brought the existence of the agreement to the OFT's attention, benefited from immunity from fines under the OFT's immunity policy. 

The other parent company of the other two undertakings settled proceedings against them by agreeing to pay a fine of £387,856.

There is the prospect of further decisions in the near future.  In December, the OFT also announced that it had commenced an investigation into certain advertising and customer referral practices in the real estate sector. 

No findings of liability have been made at this stage.

Private antitrust compensation actions

Another important aspect of antitrust enforcement is private action enforcement, under which victims of anti-competitive activity commence legal proceedings to claim compensation.  In January, the UK Government presented the Consumer Rights Bill before Parliament. The draft Bill adds to an earlier Bill presented in June 2013. 

This Bill makes the following proposals:

Competition Appeal Tribunal as single judicial venue

The CAT, which has specialist competition law expertise, will have jurisdiction over all competition damages actions. These will include both stand-alone cases (where the claimant seeks to establish the defendant's liability of its own initiative) and follow-on claims (which follow an earlier public decision against the same defendant from a competition regulator).

Conditions for authorising person to act as a representative in collective proceedings

A person may be authorised to represent a class of claimants if the Competition Appeal Tribunal considers that it is just and reasonable for that person to act as a representative in those proceedings.  In practice, many such actions will be brought by trade associations.

Undertakings as to damages in fast-track procedure

The new Bill now includes provisions relating to undertakings as to damages given in relation to the grant of injunctions in claims being considered under the fast-track procedure.

Alternatively, the CAT may impose a cap on the amount that a person may be required to pay under an undertaking as to damages given on granting an injunction.

Approval of redress schemes

The Bill now provides that the CMA may take into account the amount or value of compensation offered when deciding whether to approve a redress scheme. The draft Bill had provided that the CMA may not take this into account.

The UK's initiative in this area, together with a similar one in the EU, raises the profile of private enforcement actions and can be expected to lead to an increased number of cases. 

Even before these have entered into force, there are already a significant number of actions before the UK Courts at present. 

These include claims against participants in a price fixing cartel involving copper tube suppliers, as well as a market-sharing cartel relating to carbon and graphite products.

This article was written by Paul Henty.

For more information please contact Paul on +44 (0)20 7427 6506 or paul.henty@crsblaw.com