But businesses face issues from anti-competitive behaviour – and that includes the automotive market. In April, the OFT launched its ‘Championing Competition’ campaign to promote the benefits of competition to small- and medium-sized enterprises (SMEs) and to raise awareness of their rights and obligations if competitors engage in unfair business practices.
Recent research by the OFT suggests anti-competitive practices are rife. More than a quarter of SMEs in the UK motor trade industry believe they are harmed by unfair practices such as cartels, price fixing and collusion to set tender prices. One in three, meanwhile, is aware of anti-competitive activities and 28% feel they have been a victim of anti-competitive behaviour.
However, most respond to the anti-competitive behaviour of rivals by altering their own working practices, rather than seeking recourse to competition legislation for protection.
The OFT’s research highlights a discrepancy between those motor trade businesses that claim they are being damaged by anti-competitive behaviour and those that are reporting it to the competition authorities.
More than half (58%) agree that a competitive environment is integral to winning and maintaining customer loyalty. However, only 28% would report price fixing agreements between competitors to the competition authorities and only 3% would report a larger competitor trying to push them out of the market by cutting its prices below cost.
Competition legislation can protect SMEs from larger players from abusing their position, such as using loss leaders to drive out smaller competitors.
The OFT says that companies that have previously engaged in anti-competitive practices such as price fixing cartels should not be dissuaded from going to the authorities for fear of prosecution. It has introduced mechanisms to encourage businesses to come forward and report anti-competitive behaviour and can offer leniency to those that deliver evidence about anti-competitive behaviour in which they are, or have been, involved.
For example, the first member of the cartel to come forward with relevant evidence before the OFT has commenced an investigation would be offered total immunity from financial penalties, provided certain additional conditions were met.
For more information, see the OFT guides Competing fairly; Cartels and the Competition Act 1998; and Leniency in cartel cases. Copies can be ordered free by phoning 0800 389 3158 or email: oft@ecgroup.uk.com
Why anti-competitive behaviour doesn’t work
Companies that engage in anti-competitive behaviour should recognize that obstructing fair competition could have a negative impact on the success of their own businesses, quite apart from exposure to significant financial penalties under competition law.
A company operating as part of a cartel has little incentive to innovate or develop its business. Businesses operating as part of a cartel will likely stagnate and lack the agility of a competitive business to respond to the new challenges in the market.
In the long-term they may find they have not invested sufficiently in their businesses to survive changing market conditions.
While 58% of motor traders agree that a competitive environment is integral to winning and maintaining customer loyalty, 49% say that they have made no, or few, changes to their competitive strategies
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