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The CMA explains why competition law is important for businesses and their customers

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By Ann-Marie Hall, Head of Compliance at the CMA

10 March 2020

Key points

  • The Competition and Markets Authority (CMA) has launched a new ‘Cheating or Competing?’ campaign.
  • The launch comes after a sustained crackdown against illegal cartels – the CMA issued over £43 million in fines last year alone.
  • The CMA understands that most businesses want to do the right thing, and this campaign is designed to help them do that and to ensure fair dealing.

Healthy competition encourages businesses to improve and innovate for the benefit of their customers. It means that businesses compete on a level playing field and people get a fair deal.

But when businesses illegally collude, for example by fixing prices, rigging bids for contracts or agreeing to divide up a market for their own gain, this can lead to inflated prices and poorer products or services.  Without open competition there is less incentive to innovate or provide genuine value for money.

It’s our job as the Competition and Markets Authority (CMA) to pursue business cheats who try to subvert competition for their own gain.

The good news is that we believe the majority of businesses want to do the right thing. Eighty percent of those we polled in 2018 (in an ICM survey of 1,201 businesses and an additional 501 businesses in Scotland) in the UK said competing fairly was the right thing to do ethically.  However, many businesses don’t know what illegal anti-competitive business practices look like in practice, which puts them in danger of breaking the law.

  • Only fifty-seven per cent knew it was illegal to fix prices.
  • Nearly half either didn’t know or thought it was legal to discuss prices with competing bidders when quoting for new work.
  • Significantly more than half didn’t know or thought that dividing up and sharing customers with rivals was legal.

The consequences of breaking competition law are serious and the risk of getting caught is high. Businesses can be fined ten percent of global turnover, directors can be disqualified for up to fifteen years, and the reputational impact can be damaging and long lasting.  In the most serious criminal cases, individuals can face prison.

Accountants’ role in supporting businesses on competition law

Consider now the impact that a fine of ten percent of annual turnover, or the disqualification of one of its directors, could have on a small business you advise.

Forewarned is forearmed.

As accountants you are trusted advisers, vital to helping the businesses you work with operate efficiently and make sound financial judgements.  As such, you have a pivotal role to play in putting compliance with competition law on their radar.  Here are some top tips to help you do this.

How to help your clients assess their risk of breaking competition law

Here are some questions to ask:

  • Do they recognise what anti-competitive behaviour looks like? If so, how seriously do they take it?
  • Do they know what the potential consequences are of breaking competition law?
  • Do they have systems in place to manage competition law risks?
  • Do they have regular contact with rivals at industry events?
  • Do they seem to have information about competitors’ prices or business plans?
  • Do they share the same suppliers as their competitors?
  • Are their customers/suppliers also their competitors?

To help your clients better understand competition law risk and recognise common illegal business practices point them to CMA guidance on the Cheating or Competing? Campaign page.

What to do if your client thinks they may have broken the law

If a company is the first to report being part of a cartel which the CMA is not already investigating, and then fully cooperates, it may benefit from immunity from fines and director disqualification under the CMA’s leniency programme.

If a company comes forward and fully cooperates with the CMA, even after an investigation has started, it may still benefit from reduced fines through our leniency programme.

Individuals may also be eligible for immunity from prosecution and director disqualification if they come forward independently and cooperate with an investigation.

If your client thinks they may have broken the law, we always recommend seeking independent legal advice.

For more information, including how best to report a cartel to the CMA, visit our ‘Cheating or Competing?’ campaign page at Gov.uk/cheating-or-competing

The Competition and Markets Authority in Scotland

By Sheila Scobie, Director Nations at the Competition and Markets Authority

17 February 2020

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