04 Set Fair Competition
How good is your knowledge of competition law? If it’s perhaps not as good as it should be you are not alone. Research by the Competition and Markets Authority (CMA) has revealed that 77% of businesses do not understand competition law well. With penalties including a fine of up to 10% of global turnover, directors facing disqualification for up to 15 years and a potential five-year jail term for individuals involved in cartels, this is one area which businesses cannot afford to ignore.
In an effort to address this lack of knowledge, CMA have released a 60 second guide which is designed to help accountants to boost their clients understanding of key elements of competition law. The guide was drawn up in conjunction with leading accountancy bodies and suggests that accountants question whether clients recognise what anti-competitive behaviour looks like and whether they have appropriate systems in place to deal with competition law risks.
The Competition and Markets Authority also provides online access to a number of publications which are designed to help businesses to understand competition law regulations and to boost their awareness of anti-competitive practices. In particular, CMA suggested businesses watch out for:
- This area includes price-fixing, agreeing to limit production or agreements on competitive bidding for future projects.
- Other potentially anti-competitive agreements. These may include signing up to an exclusivity agreement which extends beyond five years, having a joint selling or purchasing agreement with competitors or agreeing not to sell a product below a fixed price.
- Abuse of a dominant position. Although the CMA say that a business is unlikely to enjoy a dominant position if its market share is less than 40%, dominance is not necessarily confined to size of business or market position. Abuse of market dominance may include selling products below cost price in order to capture market share from a competitor or offering different prices to similar customers without justification and with the intention of gaining business from others.
Whilst the steps which businesses are required to take to ensure they are aware of and comply with competition law will vary depending on the business and the sector, in general the CMA promotes a four step compliance system. Following a risk identification, assessment, mitigation and review pathway should help directors to not only understand the risk of potential competition law breaches in their own sector but should also help to raise awareness within the business as a whole. This may need to be backed up with training, particularly for those employees who are regularly in contact with suppliers, competitors and customers.
In launching the 60 second summary CMA head of compliance, Judith Frame, said “Research shows that many businesses, particularly smaller ones, could benefit from having a stronger understanding of how competition law affects them” adding “We hope this will help accountants put competition law on their clients’ radars to help them avoid risks, and to benefit from competition.”