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Competition Law Update: 2020 - 2021

02 December 2021

The UK Government temporarily relaxed elements of competition law for the fuel industry in September 2021 as a response to the fuel crisis which caused shortages across the country. The industry was exempt from the Competition Act 1998 (“the Act”), allowing companies to share information and optimise supply.

This move comes shortly after the UK Government relaxed elements of competition law for the supermarket industry in 2020 as a response to the panic buying. During this time retailers were able to share data with each other on stock levels, cooperate to keep shops open and share distribution depots and delivery vans.

Scott Wyper
Scott Wyper

Sophie Mills
Sophie Mills

What is competition law?

Competition law exists to benefit the consumer. It also aims to make businesses compete on a level playing field and protects them from other businesses acting unfairly.

The Act prohibits two main types of anti-competitive activity:

  1. Anti-Competitive Agreements under Chapter I of the Act:
    • agreements, arrangements and business practice which prevent, restrict or distort competition (or is the intended result); and
  2. Abuse of a dominant market position under Chapter II of the Act:
    • businesses prohibited from using monopolistic or monopolistic power to unfairly exploit their strong market position (50% market share rule of thumb but variable).

Impact of COVID-19 on competition law

During the COVID-19 pandemic, supply chain and distribution issues meant that businesses were unable to provide their services to the public.

Throughout the UK, businesses have assisted in efforts to prevent the consequences of the COVID-19 pandemic from affecting day-to-day life for consumers. During times of crisis, it may be in the public interest to relax competition law. Competitors can then communicate and co-operate free of the risk of being in breach of competition law.

Temporarily relaxed elements of competition law

In 2020, the Competition and Markets Authority (CMA) welcomed the temporary relaxation of some elements of competition law. The CMA also went a step further to say that where agreements between businesses fell outwith the legal relaxations, the CMA would not take enforcement actions where the agreements were necessary to protect consumers.

Types of co-ordinated actions that the CMA would accept during times of crisis, so long as they are in the public interest, would include actions to:

  • avoid a shortage or ensure a security of supply
  • ensure that products are distributed fairly and
  • continue essential services.

The CMA warned that this was not an excuse to exploit competition law. The CMA will continue to take enforcements into non-essential co-operation to prevent consumer detriment. This can include:

  • competitors exchanging information on longer-term pricing or business strategies;
  • excluding smaller rivals from collaborations to deny them access to suppliers or services
  • a business abusing its dominant position in a market to raise prices significantly above normal competitive levels, and
  • collusions between businesses that seek to keep prices artificially high.

What happens if there is breach?

  • CMA have extensive powers particularly investigative powers including “dawn raids”
  • a fine of up to 10% of global turnover and / or criminal sanctions can be imposed
  • agreements will be void and unenforceable
  • direct claims for damages may occur from consumers, and
  • disqualification as a director.

Practical pointers

The current relaxation of competition law from the Government is only temporary and as business continues post pandemic, companies must ensure that their practices are compliant. This may come under particular scrutiny given the increased prices of materials and supply shortages that we are experiencing.

It is vital that businesses decide their commercial strategy, particularly their pricing, independently. Certain topics of discussion may raise red flags during a meeting with a competitor. Avoid discussing:

  1. prices, rate, fees
  2. customers or territories
  3. future plans, especially when the information concerns pricing intentions or marketing strategies;
  4. other commercially sensitive information that is not in the public domain (business costs, profits, sales etc.).

If you are approached to get involved in anti-competitive arrangements, or have a concern about any pre-existing arrangements (such as being part of a buying consortium), you should consider taking legal advice in order to protect your position.

If your business is, or may be, subject to competition law regulations and you have any questions, please get in touch with our Corporate team who would be happy to assist you.

Scott Wyper, Partner: / 0141 221 8012
Sophie Mills, Solicitor: / 0141 221 8012

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