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Guest opinion: record competition fine puts focus on dangers of sharing business information

Iain Larkins

In July the EU issued its highest ever penalty for a cartel office, more than double its previous record.

The penalties totalling €2.93 billion against four truck manufacturers (Daimler, Volvo, Iveco and DAF) were discounted by 10% following the manufacturers admitting to the offences to bring the matter to an early conclusion. 

Scania has decided to continue to contest the action. MAN avoided a fine as it blew the whistle on the cartel.

It is understood that the EU’s investigation found the manufacturers had held informal meetings between 1997 and 2004 to discuss their future pricing plans and that after 2004 the co-ordination had generally been by email.

It is likely that the regulatory fines will now be followed by private claims from customers that believe they have paid higher prices because of the cartel.

This record fine follows other recent automotive competition law prosecutions including the €171m fines levied by the Spanish competition authorities in 2015 against most car manufacturers for exchanging sensitive future information and the £2.8m fine issued by the UK competition regulator against Mercedes-Benz and five of its commercial vehicle dealers for pricing agreements in 2013.

Although we have not yet seen prison sentences in these cases they remain a real possibility for competition law offences, particularly since April 1, 2014 when the law was changed in the UK to allow prison sentences regardless of whether the regulators can show dishonesty.

This spate of recent cases with eye watering fines and the constant threat of prison sentences underscores the importance of a competition law training.

Iain Larkins, founder and head of automotive at Radius Law, said: “It is a mistake to think that those found breaching competition are dishonest or immoral individuals.

“In our experience those at the centre of competition law offences are often hard working and diligent people who have unwittingly breached the law simply due to a lack of awareness of the rules’

The UK competition regulators own recent research supports this point. 

The research identified that:

  • 20% of UK businesses have never heard of competition law
  • 18% thought it was legal to agree prices with competitors
  • only 6% had run competition law training in the past year.

One of the most common areas of misunderstanding on competition law concerns the exchange of information between competitors.

Competition law does not prohibit all exchanges of information between competitors.

To some extent the regulators encourage co-operation as it can lead to businesses finding new efficiencies and therefore producing a better deal to the customer which is the competition regulators’ ultimate aim.

Great care, however, must be exercised when exchanging information to avoid accidently landing on the wrong side of the law.

The picture below, hopefully, helps to demonstrate what’s allowed, what’s not and what’s in the grey area.

 

Discussing future unannounced prices with competitors is absolutely banned.

Market shares and costs of business are often the KPIs that businesses want to share, but as the picture above shows this can create competition law concerns.

This is particularly the case if a competitor can use the information to calculate its competitors’ margins.

Each case needs to be considered by itself but the risks can usually be minimised by aggregating and anonymising the information.

If you are planning to implement a competition law compliance programme the UK competition regulator, the Competition and Markets Authority, does have useful guidance information on its website.

Radius Law is also here to help and produces a monthly vlog to keep you up to date with changes to the law including competition law.  You can sign up to the vlogs.

Author: Iain Larkins (pictured), director, Radius Law



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