This case study sets out how these businesses broke the law and what the lessons are for others, including a note of caution when attending senior level meetings with competitors.
In 2017 two companies, which supply drawer parts to well-known furniture manufacturers such as Silentnight, admitted to breaking competition law by agreeing not to compete on price and sharing out which customers they would supply. This reduced customer choice and gave the false appearance of competition where there was none.
There were meetings where rival senior directors came together and deliberately divided up the market - agreeing not to go after each other’s clients so they could keep prices artificially high and avoid ‘a price war.’
…in the course of the meeting…we came to an understanding that if he agreed not to attack our customers we would not attack his….
It was agreed therefore that I would provide him with our prices with a view to him quoting a significantly higher price to Silentnight such that they wouldn’t get the business.
Bid rigging behaviour included the exchange of sensitive pricing information to enable tactical bids. A search of one of the businesses premises found a handwritten note in a senior employee’s desk - it detailed a rival’s costing system for drawer fronts.
This investigation was triggered by a tip-off to the CMA cartels hotline.
How this broke the law
When businesses collude to market share, rig bids and/or share commercially sensitive information this can harm customers by increasing prices, and reducing quality and choice. In this case, the collusion concerned products which are found in furniture in homes and offices across the UK.
Action taken by the CMA
The CMA fined the companies involved £2.8m which included uplifts for director level involvement.
Lessons from this case:
- agreeing with your competitors that you won’t undercut each other on price or compete for your customers is illegal, and there can be serious consequences for the businesses involved
- sharing information with competitors, even at a single meeting, can also be illegal
If you are approached to join a cartel or to get involved in anti-competitive arrangements you should:
- immediately reject the approach, clearly and unequivocally
- leave the meeting and make clear you refuse to take part in anything illegal
- never disclose commercially sensitive information
Advice for individuals and businesses
- be clear about the competition law rules around collaboration and learn to recognise the kinds of behaviour that are illegal. A good place to start is our introductory competition law guides, short films on market sharing and bid-rigging, and our advice on Joint Ventures and Competition Law - Dos & Don’ts
- directors have a responsibility to lead by example and promote a culture of compliance within the businesses they lead - in this case director level involvement led to a fine uplift
- seek independent legal advice if you are unclear whether an agreement or arrangement is anti-competitive or not
If you think that you or your business may have been involved in illegal cartel activity, you may be able to benefit from lenient treatment and protection from disqualification for your current and former directors by being the first to come forward and confessing to the CMA. Call our leniency number on 0203 738 6833.
More information on our stop cartels page
This case study does not constitute legal advice and should not be relied upon as such.