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Forewords
Iain Wright, Institute of Risk Management
We welcome the latest updates to this guide and are delighted to have worked with the Competition and Markets Authority (CMA) in bringing this to fruition.
This short guide for risk professionals focusses on the risks of contravening UK competition law and is one of a suite of IRM briefings on topical risk issues. Fair and honest competition benefits us all. It creates free and transparent markets in which to do business. This document explains the nature of competition law enforcement in the UK. It offers some powerful case studies to highlight both unacceptable business practices and show just how easy it can be to get into difficulties if the risks are not properly understood and managed. It also provides suggestions to help organisations approach the management of both competition and legal risks in a systematic and effective way.
While the legal framework we cover here applies to the UK, many other territories have similar antitrust laws. The risk management approach we propose will also prove helpful there. It is a statement of the obvious that organisations should have a zero-risk appetite for breaking the law. Yet to achieve this requires not just that the right policies, processes and procedures are in place. It is also vital that an organisation’s culture, from board room to shop floor, positively supports ethical and legal behaviour.
There are further challenges here within the extended enterprise, which is to recognise and address this risk beyond the boundaries of the immediate organisation and out into the network of customers, supply chain and partners. Having a clear understanding of the risk is a necessary first step, and one which this guide aims to support.
I would like to thank all the members of the Institute who have contributed to this work. I would also like to thank the CMA for providing the information and resources needed to publish this document.
Iain Wright CFIRM, Chair
Institute of Risk Management
Andrea Coscelli, Competition and Markets Authority
Business leaders have an individual responsibility to be well informed about what is happening within the companies they manage. They also set the tone.
The risk of getting caught breaking competition law is increasing. The CMA is toughening its approach to enforcement, with fines on companies accompanied by increased use of powers to obtain the disqualification of directors of the companies involved. The CMA has improved its surveillance techniques and its investigation methods. It is making it easier for witnesses to report illegal activity with an online reporting form, online cartel checker, and it has run a number of cartel awareness campaigns.
Individuals are far less likely to break the law if they know they may be held directly responsible for it. And the public rightly expects there to be personal responsibility for very serious wrongdoing in firms.
The CMA now considers, in all cases where competition law has been broken, whether to seek the disqualification of directors of the companies concerned. Prior to 2016, the CMA hadn’t used its disqualification power at all. But that has changed. The publication of the Guide comes as the CMA secures its 20th disqualification of a company director, 10 of which were during the reporting year ended 31 March 2020 alone, with more cases in the pipeline.
The outbreak of coronavirus (COVID-19) also raised legitimate questions amongst businesses about the circ*mstances in which cooperating with rivals may be acceptable. In response to this unprecedented situation, the CMA was able to offer reassurance for firms where cooperation was necessary to meet the needs of consumers, for example by ensuring security of supply of essential products. At the same time, the CMA made clear that we would not tolerate unscrupulous businesses exploiting the crisis as a ‘cover’ for non-essential collusion.
In business, the stakes are high for individuals on boards caught out for wrongdoing. They must be alive to competition law risk and take an active role in ensuring compliance. As risk and governance advisors you play a pivotal role in putting this on the radar of your business leaders, and I hope this guide will help you do this.
Andrea Coscelli, Chief Executive
Competition and Markets Authority
Reasons why complying with competition law is good business practice
Competition law is designed to protect businesses and consumers from anti-competitive behaviour. The law safeguards effective competition in order to deliver open, dynamic markets and enhanced productivity, innovation and value for customers.
All businesses must comply with competition law and there can beserious consequences for businesses and individuals, including directors, for non-compliance.
Increased risk of detection – in simple terms, a ‘business cartel’ is where businesses agree not to compete with one another and cartel enforcement is a CMA priority. The CMA’s enhanced capabilities to detect and investigate cartels increase the risk of detection and prosecution.
It makes business sense to comply – long-term compliance saves money by avoiding the risk of fines and significant damage to a company’s reputation. The short guide on risk management and internal controls issued in September 2014 by the UK Financial Reporting Council [footnote 1] places a clear responsibility on boards of UK listed companies to ensure that appropriate risk management and internal control systems are in place. This includes ensuring that appropriate culture and reward systems are embedded within the organisation. Compliance with competition law should be considered within the context of the board’s assessment of its principal risks.
Risks to your business if competition law is broken
Fines on the business
Businesses that are found to have broken competition law can be fined up to 10% of their annual worldwide turnover and ordered to change their behaviour.
Businesses can be subject to damages claims by third parties.
Director disqualification
Company directors can be disqualified from managing a company for up to 15 years.
Reputational damage
The negative impact on a company’s reputation can be significant and long lasting.
Prison and criminal fines for individuals involved
Individuals who engage in cartel activity may be investigated for committing a criminal offence, prosecuted and sentenced to up to 5 years in prison and/or made to pay a fine. Individuals may also be subject to the confiscation of assets under the Proceeds of Crime Act 2002.
Understanding the increasing risks for company directors
If you are the director of a company that is caught breaking the law through anti-competitive activity – such as price-fixing, bid-rigging or market sharing – you could face serious personal consequences.
What do our enforcement powers mean for directors:
- Where we find a director was involved in the breach, they may be disqualified and their company could face an increased fine. In the most serious cases the director may be prosecuted.
- Not knowing is no excuse. Directors must be clear on the risks of breaking competition law and lead by example – promoting a culture of compliance led from the top down is key.
Director disqualification explained
We can seek the disqualification of a director so as to ban them from holding company directorships or being concerned in the management of a company for up to 15 years.
We can do this in 2 ways:
- by accepting a legally binding undertaking (commitment) from the individual
- by seeking a court order to disqualify them
The main benefit of cooperating with us (option 1) is the possibility of a reduced disqualification period.
Director disqualification is an increasing risk because:
- we have updated our processes to fit better with the court system, increasing our efficiency in using this power, meaning we can pursue more cases
- we now consider whether to pursue director disqualification in all cases where competition law has been broken
Leniency
If a company comes forward and qualifies for ‘leniency’ by confessing its involvement in a cartel, current and former directors of the company who cooperate with the CMA’s investigation may be able to avoid disqualification and prosecution in respect of the reported cartel conduct. In simple terms, a ‘cartel’ is where businesses agree not to compete with one another.
The CMA website has resources to help directors avoid these risks, including: Advice for company directors on avoiding disqualification.
If you become aware of a competition law breach you should take action to stop it immediately, seek independent legal advice and familiarise yourself with the CMA’s leniency programme.
More information
- For further information on leniency, read Actions to take if you think competition law has been broken
How this guide can help you
This guide provides a basic overview of the law, outlining the steps you can take to help identify and mitigate competition law risks specific to your organisation. It is intended to help you ensure your business is compliant with competition law. It may help you to spot when others are engaging in illegal anti-competitive behaviour and it provides you with details on what to do if you think your business or a competitor is breaking competition law.
This guide is focussed on UK law as applied to agreements and conduct that affect UK markets. Other territories have similar competition or antitrust laws. You can access links to international guidance via the International Competition Network (ICN) and the International Chamber of Commerce (ICC).
What you should watch out for
There are 3 key things you need to be vigilant about in business, which are:
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Cartels
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Other anti-competitive agreements
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Abuse of dominant position
Anti-competitive behaviour to watch out for – cartels and other potentially anti-competitive agreements
I was just going to a meeting to shake a few hands. It was almost a social occasion where you just said hello to your rivals in the industry. I didn’t give it any real thought… Staggering stupidity with the benefit of hindsight.
From Does Prison Work for Cartelists? – The view from behind bars. An interview of Bryan Allison by MichaelO’Kane (The Antitrust Bulletin: Vol 56, No. 2, summer 2011)
Cartels are the most serious types of anti-competitive agreements, where 2 or more businesses agree, whether in writing or otherwise, not to compete with each other.
Cartels deprive consumers and other businesses of the benefits of fair competition. In the long run, cartels undermine competitiveness in the wider economy.
Cartels include agreements to:
- fix prices
- engage in bid-rigging (for example, cover pricing)
- limit production
- share customers or markets
A cartel may also arise where rival businesses exchange commercially sensitive information, or when one business unilaterally discloses such information to another.
The scope of the law in relation to the disclosure/exchange of commercially sensitive information is broad. The key issue is whether the disclosure/exchange of information substantially reduces uncertainty around the company’s future commercial behaviour in the market place. The fact that information sharing can start easily and seem relatively harmless at first makes cartels a significant risk. Organisations can easily slip into a cartel situation without realising what is happening.
Other agreements that could be anti-competitive include agreements, whether in writing or otherwise, that involve:
- joint selling or purchasing with competitors
- a retailer agreeing with its supplier not to sell below a particular retail price
- agreeing to a long exclusivity period
Case study 1: Construction firms fined
In 2019, the CMA fined 3 construction firms more than £36 million for breaking competition law in supplying certain concrete drainage products for building projects. 2 directors have also been disqualified for 6.5 and 7.5 years, with additional disqualification cases pending in court.
The businesses manufactured pre-cast concrete drainage products which are essential for roads and railways and used in large infrastructure projects. The customers who typically need to buy these types of products include local and national government bodies, as well as utilities, engineering and construction firms.
From July 2006 to March 2013, instead of competing fairly, the CMA found that the 3 firms entered into illegal arrangements under which they agreed to fix or coordinate their prices, shared the market by allocating customers and regularly exchanged competitively sensitive information.
According to the CMA’s findings, the businesses discussed and agreed their spot market price lists, where prices are agreed on a deal by deal basis. These were then used by sales teams as a basis for negotiating with customers – in effect, the agreed list prices acted as ‘targets.’
These arrangements were found by the CMA to have continued for nearly 7 years and involved meetings attended by senior executives from each of the firms. The object of the arrangements was to increase pricing levels, and to maintain the parties’ respective market positions. One of the participants at a meeting summed this up as follows:
But guys, look at our, look at all our financial numbers, we’ve all had a good year. Everybody has had a good year financially and profit-wise. And that’s come about by all sitting here and [being] patient.
The CMA recorded a number of these meetings and used the transcripts as evidence when arriving at its final decision.
Lessons learned from this case
- The construction sector remains in the CMA’s sights.
- Tough market conditions are no excuse for breaking the law.
- Never exchange competitively sensitive information.
- Never agree with rivals not to compete for customers or business.
- The CMA has sophisticated means of capturing evidence and despite the businesses meeting in various different locations, we were watching.
- It is not enough to claim you are complying with the law – you actually need to do so.
More information
- The CMA’s ‘Cheating or Competing?’ campaign is shining a light on bid-rigging and anti-competitive business practices.
- Bid-rigging: advice for public sector procurers: A short guide on how to avoid, identify and address bid-rigging during the public sector procurement process.
- If a company comes forward with information about its participation in a cartel – in simple terms, businesses that agree not to compete with one another – and cooperates with the CMA, even after an investigation has started, the company can still benefit from reduced fines through our leniency programme. In this case one of the businesses did this and it made a big difference to the size of fine they then faced.
Case Study 2: Office design and fit-out suppliers fined over £7 million
The cover bids appeared genuine but were designed to lose, which meant there was less genuine competition for the contract.
In 2019, the CMA fined 5 companies over £7 million and 6 company directors were disqualified for ‘cover bidding’. Cover bidding is where 2 or more companies secretly agree that at least one of them will submit a bid that is deliberately high or of poor quality during a competitive tender process. They do this so that another of the companies can win the tender with what appears to be a better offer or proposal.
In this case, the companies’ cover bidding meant clients missed out on opportunities to get the best possible deal. On each of the 14 occasions it took place, the evidence shows that one company who wished to win the contract arranged for one or more of the other companies to submit an illegal cover bid. This gave the first company a higher chance of winning the work.
In almost all instances, the firm leading and/or instigating the scheme told the company providing a cover bid what price it should submit. In most cases, the ‘instigator’ also provided the cover bidder with completed costs and/or design plans, with the intention that the cover bidder submit these as its own bid.
Lessons learned from this case
- Agreeing with a competitor to submit a cover bid is illegal. Never agree to submit a cover bid, even if you do not want to win the tender or take on the work.
- Even if the illegal activity only happened once, or took place a long time ago, it can still have serious consequences for those involved.
- The investigation was started after one of the companies contacted the CMA under its leniency programme to admit its involvement.
Case study 3: Estate agent directors disqualified
In 2017, 5 Somerset estate agents were fined over £370,000 and 4 directors were subsequently disqualified for agreeing to work together to fix their minimum commission rates for selling residential properties.
The rival agents all fixed their minimum commission rates at 1.5% in order to make themselves more money, denying local home owners the chance of getting a better deal when selling their property.
Their rationale was: ‘…with a bit of talking and co-operation between us, we all win!!!’ Email evidence also explained how ‘the aim of the meeting…will be to drive the fee level up to 1.5%’ and ‘…it’s really important we all give it the priority it deserves (making as much profit as possible!)’.
Each business took it in turn to ‘police’ the illegal agreement. According to email evidence obtained in the investigation, agents were to report any issues ‘to the policeman immediately and get the matterresolved rather than let it fester and risk the agreement falling apart!!!!’.
The 6th business involved in this price-fixing was not fined, and its directors avoided disqualification because it was the first to report the illegal activity under the CMA’s leniency policy and fully cooperated with the CMA’s investigation.
Lessons learned from this case
- Be careful when talking business with your competitors and be especially wary of any conversations about pricing, or about a shared approach to pricing. Rival businesses must decide and set prices independently of each other.
- Competition law applies to small businesses as well as large ones. The estate agents in this case were small local or regional businesses.
- The CMA has now taken 3 enforcement cases in the property sector and remains committed to tackling anti-competitive conduct in this sector.
More information
- Visit our ‘Cheating or Competing?’ campaign page for more on price-fixing.
Case study 4: Music instrument manufacturer fined £3.7 million
In 2019, the CMA fined Casio £3.7 million for breaking the law by maintaining online resale prices.
If suppliers dictate to resellers a specific minimum price that they are not allowed to drop below, or otherwise stop them from selling at a reduced price, there is no incentive for rival resellers to compete. Customers lose out because, even if they shop around, they are unlikely to find better deals if prices are kept artificially high. This practice is illegal and is known as Resale Price Maintenance (RPM).
Casio set minimum prices for online resellers of its digital pianos and keyboards.
It policed the minimum pricing policy by monitoring its resellers to make sure they didn’t drop below this price. If resellers weren’t complying, Casio threatened sanctions such as withholding products which would mean the reseller in question could not fulfil orders.
Casio used price monitoring software to monitor online prices in real time, tracking prices to make sure resellers were selling at or above the price specified by Casio. Casio’s monitoring was also helped by resellers letting Casio know when other resellers were dropping their price.
Lessons learned from this case
- Suppliers must not take any action that limits a reseller’s freedom to set their own price.
- Price monitoring software should only be used as part of healthy competition, and not as a way of keeping prices artificially high by enforcing RPM.
- You can’t get around the law by taking conversations ‘offline’. In this case, Casio tried to avoid writing down what they were doing as they knew it was illegal, but the strategy did not stop the CMA from investigating and imposing a fine.
- As a reseller, you can also be subject to investigation for breaking the law if you have co-operated with a minimum pricing policy.
Find more case studies about musical instruments and RPM, including Fender, Korg and Roland, on the business cartels case studies collection page.
Case study 5 : Model agencies and trade association fined £1.5 million
Membership associations should take particular care to avoid making recommendations or takingdecisions which interfere with their members’ commercial autonomy.
In 2016, 5 modelling agencies and their trade association, the Association of Model Agents (AMA), were fined £1.5m for breaking competition law by colluding instead of competing on the prices they charged for modelling services. This took place from at least April 2013 until March 2015.
The modelling agencies and the AMA regularly and systematically exchanged information and discussed prices in the context of negotiations with particular customers. In some cases, the agenciesagreed to fix minimum prices or agreed a common approach to pricing.
For example, where one of the agencies was concerned about a low price offered by a customer, it would email the other agencies in the group asking for comment. In one instance, this email was sent: ‘If youthink this rate is wrong please reply and any other observations would be good. We have to stop this as it will spread like MEASLES!’
In addition, the AMA and the agencies sought to influence other AMA members by regularly issuing email circulars, known as ‘AMA Alerts’, urging AMA members to resist the prices offered by customers on the grounds they were too low.
Lessons learned from this case
- The CMA takes illegal price collusion and the exchange of confidential pricing information seriously and will investigate businesses in all industries – including those that operate in the creative sectors.
- Trade associations can be found guilty of breaking competition law.
More information
- Read the CMA’s, short guide on trade associations about the main points that trade associations need to know about competition law.
Case study 6: Household fuel suppliers fined over £3.4 million
In 2018, CPL and Fuel Express, 2 of the main suppliers of bagged household fuels to national supermarkets and petrol stations, were fined over £3.4 million for breaking competition law by market sharing, including rigging bids. For each of the tenders concerned, they agreed that one of them would deliberately submit a higher bid that was designed to lose, so that the existing supplier could retain its customer.
This activity is a form of bid-rigging under which competitors share out the market between them instead of competing fairly and offering the best deal to win or keep customers.
The businesses also exchanged competitively sensitive and confidentialpricing information (including the details of ongoing tendering processes) to enable their market sharing cartel.
The investigation was started after a tip-off to the CMA’s ‘cartels hotline’ which led to surprise inspections at the offices of the 2 suppliers.
Lessons learned from this case
- Regardless of when it occurred and how long it lasted, illegal business practices can come back to haunt you. The conduct in this case dated back to 2010-11.
- It’s not only formal written agreements with competitors that can break competition law – ‘gentleman’s agreements’ and informal arrangements can be illegal too.
- Even if the businesses themselves keep quiet about the breach, you can’t assume that you won’t get caught – this case started after intelligence work by the CMA following a tip-off to its ‘cartels hotline’.
More information
- For more on market sharing and why anti-competitive activity is bad for business, see our ‘Cheating or Competing?’ campaign page.
Case study 7: Water tank suppliers fined over £2.6 million
In 2016, 4 of the UK’s main water tank suppliers were fined over £2.6 million for breaking competition law. Another business was fined £130,000 for sharing commercially sensitive information at a single meeting that was secretly recorded by the CMA.
Galvanised steel tanks are used for water storage in large buildings, such as schools or supermarkets, and supply the water usedin fire sprinkler systems.
In this case, the 4 main suppliers would often meet to discuss matters relating to their industry. However, they went on to hold secret meetings where they agreed to fix prices of tanks, divide up customers and rig bids for contracts. Their intention was to avoid having customers try to negotiate cheaper prices.
Sharing commercially-sensitive information with competitors
In July 2012, a representative from a new supplier that had recently entered the market was invited to a meeting with 3 of the other suppliers that were part of the illegal cartel agreement.
Although the new supplier refused to join the cartel, they nevertheless stayed at the meeting and joined in a discussion about their general approach to pricing and quoting for certain tanks. This sharing of non-public commercial information is illegal; it could have helped rivals in their own strategies and pricing.
Lessons learned from this case
- Agreeing with your competitors that you won’t undercut each other on price or compete for each other’s 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
Anti-competitive behaviour to watch out for - abuse of a dominant position
A business can breach competition law, even without collusion or agreement with other businesses, if it has a ‘dominant position’ in a market and it unilaterally abuses that dominant position.
A business will have a dominant position, broadly speaking, if it has market power. The definition of this is not black-and-white, but broadly speaking the risk of a dominant position arises with a persistent market share of 40 per cent [footnote 2] or more.
To assess whether a business may occupy a dominant position, consider the following questions:
- What is/are the relevant markets in which the business is operating?
- Does the business have persistently large market shares in excess, for example, of 40 per cent, in the relevant market?
- Are there barriers to entry or expansion that may prevent potential competitors from entering or expanding in the market?
- Do the customers of the business have any degree of buying power that they can exert on the business?
To identify if a dominant business is at risk of abusing its position, consider the following questions [footnote 3]:
- Has the business refused to supply an existing customer without objective justification?
- Has the business offered different prices or terms to similar customers without objective justification?
- Has the business granted non-cost-justified rebates or discounts tocustomers that reward them for a particular form of purchasing behaviour, or accepting exclusivity provisions?
- Does the business require customers wishing to purchase one product to purchase a different one in addition (tying or bundling)?
- Is the business charging prices so low that they do not cover the costs of the product or service sold?
- Is the business refusing to grant access to facilities that a business owns which may be essential for other competitors to operate in a market?
A risk-based approach to ensure your business is compliant
Setting the core context: commitment to compliance
At the core of this process is an awareness of the competition law landscape and a commitment to compliance throughout your organisation. Your board and senior management must take overall responsibility for instilling this commitment to compliance.
There are different ways to help ensure that your business complies with the law, but key to them all is instilling a compliance culture in your organisation. This means that managers at all levels of a business, from the top down, need to demonstrate a commitment to complying with the law.
The risk of non-compliance with competition law should complement or be integrated into the process that the organisation uses to manage all its other risks, in line with standard frameworks that may be in use such as ISO 31000. Organisations should make clear that they have a zero appetite for breaching competition law, in line with a zero appetite for all other unlawful acts.
There are 4 steps in the risk management process.
Establish a risk-based approach tailored to your organisation
An intelligent and proactive risk management approach, tailored to your organisation, rather than a ‘tick box’ compliance exercise, is strongly recommended.
Core: Commitment to compliance (from the top down)
Senior management, especially the board, must demonstrate an unequivocal commitment to competition law compliance. Without thiscommitment, any competition law compliance efforts are unlikely to be successful.
Step 1: Identify the risks
… everyone had an aura of invincibility, and I remembered thinking about this, years prior, when I said, ‘We are a tiny outfit, we are not involved with consumers, who are we hurting?… who cares about us? We are so far under the radar nobody will ever take any notice of us.
From Does Prison Work for Cartelists? – The view from behind bars. An interview of Bryan Allison by MichaelO’Kane (The Antitrust Bulletin: Vol 56, No. 2, summer 2011)
- Are you at risk because your employees lack awareness and knowledge about competition law, the behaviours it covers and the associated risks?
- Look carefully at your business and identify areas where you might risk breaking competition law. For example, do your employees have contact with your competitors at industry events orotherwise?
- In your market, do employees move frequently between competing businesses and do you have people who have recently joined from competing businesses?
- Do your employees seem to have information about your competitors’prices or business plans?
- Do your staff attend trade association or social events where representatives of your competitors are also present?
- Do you share the same suppliers as your competitors?
- Are your customers/suppliers also your competitors?
- Do you ever work in partnership with your competitors?
- Are you entering into exclusive contracts for long periods?
- Do your agreements contain joint selling and purchasing provisions with your competitors?
- Do your agreements contain requirements to share commerciallysensitive confidential information, or to collaborate, with your competitors?
- Does your business impose resale restrictions on retailers that sell your products?
- Are you a business with a large share of any of the markets in which you operate?
Identify the key competition law compliance risks faced by your business. These will depend upon the nature and size of your business.
Step 2: Analyse and evaluate the risks
I hadn’t thought anything would happen. Why would anybody… prosecute us?
From Does Prison Work for Cartelists? – The view from behind bars. An interview of Bryan Allison by MichaelO’Kane (The Antitrust Bulletin: Vol 56, No. 2, summer 2011)
Once you have identified all the areas where there is a risk your business might break competition law, you can then work out how serious these risks are. Classification may be quantitative, i.e. expressed in monetary terms, or qualitative such as ‘high/medium/low’. Assessment of impact on the business should consider reputational consequences and the effect on the brand.
Businesses should consider assessing which employees are in high-risk areas. These may include employees who are likely to have contact with competitors and employees in sales and marketing roles; employees in some back-office functions may be classified as low-risk.
Work out how serious the identified risks are. Often it is simplest to rate them as low, medium or high. In particular, businesses should consider assessing which employees are in high-risk areas. These may include employees who are likely to have contact with competitors and employees in sales and marketing roles.
Step 3: Manage the risks
One respondent expressed the view that compliance can be achieved ‘… through two routes mainly. One is behavioural, and one is what I call engineering’, the latter of which referred to the implementation of risk management systems and procedures.
OFT Drivers of Compliance and Non-Compliance with Competition Law Report, May 2010
This step involves setting up policies, procedures and training to reduce the likelihood of the risks you have identified occurring and to reduce the consequent impact on your organisation. For example, if you have identified employees meeting competitors at conferences as being high-risk, you could run training to make sure your teams know what they are, and are not, allowed to communicate to competitors. This training could also be supported by an employee code of conduct and/or ethics policy.
What you do will depend on the risks identified and the likelihood of the risk occurring in your particular context. By way of example, some businesses have found the following measures to be helpful:
- Training employees in competition law. This might include face to face training for high-risk employees and e-learning awareness training for low-risk employees.
- Implementing an employee code of conduct implementing a company-wide ethics policy to underpin a healthy culture in respect of risk (for more information, see the IRM publications on Risk Culture)
- Making sure employees tell you if they are joining a trade association or attending events where they might be meeting with competitors.
- Implementing a system where all contact with competitors is logged
- Producing a checklist to help employees with decision-making, particularly when under pressure
- Establishing a system so that employees can get advice before action (for example, legal advice on a contract) establishing a system for employees to report, on a confidential basis, any competition law concerns that they might have.
- Making anti-competitive behaviour a disciplinary matter in employment contracts and ensuring that it is covered in the company’s disciplinary policy.
Set up policies, procedures and training to ensure that the risks you have identified do not occur, and how to detect and deal with them if they do. What is most appropriate to do will depend on the risks identified and the likelihood of the risk occurring.
Step 4: Monitor and review
Getting the monitoring and follow-up to competition law compliance training right [is] just as important as actually delivering training.
Business respondent to OFT Drivers of Compliance and Non-Compliance with Competition Law Report, May 2010
Review steps 1 to 3 and your commitment to compliance regularly, to ensure that your business has an effective compliance culture. Some businesses review their compliance efforts on an annual basis, others review less frequently, depending on their potential exposure. There may be occasions when you should consider a review outside the regular cycle, such as when taking over another business or if you are subject to a competition law investigation.
You should also be considering:
- What management information (e.g. key risk indicators and key control indicators) are needed to help management and the board monitor the risk? For example, you may have targets for the percentage of staff trained.
- Are you receiving adequate assurance that the measures put in place to manage this risk are effective?
- Are your assurance functions tasked to include this risk in their work and properly coordinated to ensure there are no gaps or overlaps?
- Has internal audit the necessary independence, objectivity, authority and expertise, not only to assure on your risk management and compliance functions, but also assess your risk and control culture and the effectiveness of your speaking out (internal whistleblowing) mechanisms?
Actions to take if you think competition law has been broken
Businesses and individuals that come forward to report their own involvement in a cartel may have their financial penalty reduced or avoid a penalty altogether.
Leniency and informant rewards
Businesses and individuals that come forward to report their own involvement in a cartel may have their financial penalty reduced or avoid a penalty altogether (under the CMA leniency programme). To qualify for leniency, applicants must admit their involvement, co-operate fully with the CMA’s investigation and stop their involvement immediately unless the CMA directs otherwise, which it will do only rarely.
Provided they co-operate, the applicant’s directors may also avoid disqualification and its employees and officers may be granted immunity from prosecution.
For information about leniency and to apply, call: 020 3738 6833
The CMA is prepared to offer financial rewards for information about cartel activity (informant rewards). Individuals who have themselves participated in cartel activity may be granted immunity from prosecution and from director disqualification if they come forward and report the cartel, but will not generally qualify for a financial reward.
Private redress
Businesses as well as individuals can bring a claim before a court if they have suffered loss as a result of a relevant infringement of competition law and/or seek an injunction to stop such activity (private litigation). Additionally, restrictions in agreements that breach competition law may be unenforceable.
Further information about the short guide
Our project team
This original version of the short guide was developed jointly by the IRM and the CMA, who would like to thank the following who contributed in various ways towards drafting this short guide.
Members of the IRM Group
Name | Job role and company |
---|---|
Richard Anderson CFIRM | Past IRM Chairman, Principal, Anderson Risk |
Mark Butterworth CFIRM | Managing Director, Condie Risk Consultancy |
Jonathan Blackhurst CFIRM | Head of Risk Management, Capita plc |
Socrates Coudounaris CFIRM | IRM Deputy Chair, Executive Director, Reinsurance Group of America |
Ray Flynn CMIRM | Independent Risk Management Consultant |
Alex Hindson CFIRM | Chief Risk Officer, Argo Group |
Keith Smith CFIRM | IRM Director, Principal Consultant, Risk Covered |
Carolyn Williams CMIRM | Director of Corporate Relations, Institute of Risk Management |
Our supporters
- Alarm - The Public Risk Management Association
- Airmic
- Chartered Institute of Internal Auditors
- Icsa
- Institute for Collaborative Working (ICW)
- Non-Executive Director’s Association (NEDA)
EU Exit
The United Kingdom formally left the European Union on 31 January 2020. Under the EU/UK Withdrawal Agreement, there is a transition period that runs until 11 pm on the 31 December 2020.Although EU Exit is likely to have a number of important consequences for the UK competition regime in the future, during the ‘Transition Period’ the CMA continues to apply EU law in the UK in the same way as previously.
For more information on the EU Exit, read the guidance on the functions of the CMA under the Withdrawal Agreement.
Further links
- CMA’s ‘Cheating or Competing?’ campaign page
- Read more on the CMA leniency programme and no-action letters
- For more information on international guidance, visit the InternationalCompetition Network (ICN) and the International Chamber of Commerce (ICC)
Institute of Risk Management
Telephone: 020 7709 9808
Email: enquries@theirm.org
Website: www.theirm.org
Institute of Risk Management
2nd Floor, Sackville House
143-149 Fenchurch Street
London
EC3M 6BN
United Kingdom
Competition and Markets Authority
Telephone: 020 3738 6000
Email: general.enquiries@cma.gov.uk
Website: www.gov.uk/cma
Competition and Markets Authority
The Cabot
25 Cabot Square
London
E14 4QZ
United Kingdom
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Guidance on Risk Management, Internal Control and Related Financial and Business Reporting, Financial Reporting Council, September 2014.↩
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There is case law that states that dominance can be presumed in the absence of exceptional circ*mstances pointing the other way if an undertaking has a market share persistently above 50 per cent.↩
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This list of considerations is illustrative only and is neither definitive nor exhaustive. Although the activities carried out by a dominant business listed here will not necessarily constitute an abuse in every case, they can give rise to increased risk, or be indicative, of abuse and may warrant assessment.↩