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There are two major UK laws protecting competition:

• the Competition Act 1998
• the Enterprise Act 2002

The Competition Act 1998

The Competition Act 1998 bans anti-competitive agreements between businesses. You must not, for example:

• agree with your competitors to fix prices or terms of trade, eg agreeing minimum prices or price rises 
• agree with your competitors to limit production in order to reduce competition
• share out markets or customers with your competitors - eg agreeing with a competitor that you'll bid for one contract and they'll take another

Any agreement that restricts competition is covered. This will be particularly relevant in the case of agreements between businesses with a major presence in the market. But, even the smallest business needs to avoid anti-competitive agreements. This includes price fixing and market sharing. As well as formal agreements, the law also applies to other looser forms of cooperation between businesses.

The Competition Act also forbids the in a market. This will be relevant to businesses that have market power, often reflected in a significant market share.

The Enterprise Act 2002

Under the Enterprise Act 2002, it is also a criminal offence for individuals to engage in certain types of activity that create business cartels. These are agreements among businesses to not compete. They reduce competitive pressure.

Consequences of breaching the law

These laws give the Competition and Markets Authority (CMA) powers to investigate and take action. Consequences can include large fines for businesses, disqualification of directors and even prison time or fines for people who have been involved in cartel conduct. Customers and competitors may also be able to sue you or your business.

The benefits of competition

Anti-competitive behaviour is harmful not only to consumers but also to businesses that compete fairly or which are themselves customers of certain goods or services. All businesses, therefore, have an interest in reporting anti-competitive behaviour, even when they are not themselves involved.

The CMA has produced a range of , including this one on why competition is good for business:

Agreements between businesses that prevent, restrict or distort competition and which may affect trade in the UK or a part of it are not allowed.

This includes agreements that:

• fix prices for goods or services
• limit production
• divide up markets and allocate customers

The law also covers decisions by associations of businesses. The law applies to both formal and informal agreements. A shared understanding or 'gentleman's agreement' may be enough. The law also covers 'concerted practices'. This describes forms of cooperation between businesses that fall short of an agreement or decision.

Price fixing and market sharing

Competition law prohibits almost any attempt by competitors to fix prices with competitors. You must not: 

• agree prices with your competitors - eg you can't agree to work from a shared minimum price list
• share markets and divide up customers or limit production - eg if two contracts are put out to tender, you can't agree that you'll bid for one and let your competitor bid for the other
• agree with your competitors what purchase price you will offer your suppliers

If you supply goods for resale, for example to a wholesaler, distributor or shop, the law will prevent you from agreeing with the reseller a minimum price at which those goods may be resold.

The law doesn't just cover formal agreements. It can also apply to other activities such as 'gentleman's agreements' and even informal discussions where confidential commercially sensitive information is disclosed. For example, you shouldn't discuss your pricing plans with your competitors.

Competition law doesn't ban all agreements that restrict business behaviour. This will depend on how likely it is for the agreement to affect competition on the market.  In particular, agreements between businesses with small market shares are unlikely to be banned (except business cartels). There are almost no circumstances where a price-fixing or market-sharing agreement would be allowed.

The Competition and Markets Authority has produced , including this one on price-fixing.

A business cartel is a group of businesses working together to increase their profits. This includes: 

• Price fixing - two or more competing businesses directly or indirectly fixing prices.
• Output quotas - limiting or preventing supply or production between competing businesses.
• Market sharing - dividing up customers or prospective customers between competing businesses. This is where two or more businesses agree not to poach each other's customers or compete against each other in certain areas.
• Bid rigging - an agreement between businesses as to whether or not to bid for certain tenders eg an agreement that one or more of them will not bid or that one will put in an falsely high price so another business can win the contract.

These agreements may be written or verbal and don't need to be formal for the law to apply. Cartels are illegal under both civil and criminal law.

Consequences

If your business is found to be a member of a cartel, it could be fined up to 10 per cent of its turnover. In some cases, a person within your business could receive an unlimited fine or a prison sentence of up to five years. Company directors may be disqualified from acting as a director for up to 15 years.

Third parties - including competitors, customers and consumers - can also bring damages claims against the business.

However, if a business ends its involvement in a cartel and informs the Competition and Markets Authority (CMA), it may be granted protection or a reduced financial penalty. Its employees may also qualify for protection from prosecution and from director disqualification. See report a business cartel and leniency for cartel information.

A business cartel is an agreement (whether written, oral or both) between competing businesses that does one or more of the following:

• fixes prices
• rigs bids (tenders)
• establishes output restrictions or quotas
• shares or divides markets

Cartels seriously damage other businesses and the economy and consumers end up paying inflated prices or receiving lower quality goods and services. One of the priorities of the Competition and Markets Authority (CMA) is to act against cartels.

Report a cartel to the CMA

Cartels are illegal under both civil and criminal law. The CMA encourages anyone who has seen cartel activity to report it. Call the cartels hotline on Tel:  020 3738 6888 or Email: cartelshotline@cma.gov.uk.  Alternatively, fill out the . Take action against cartels and if the information you provide leads to an investigation, you may .

For more information, see the CMA website. 

You may already have information that would be useful to the CMA. This should be reported to the CMA. You should also contact the CMA for advice before trying to obtain any further evidence of cartel activity. The CMA will be able to tell you if they would like you to take any further action and, if so, how to reduce any risks you may face. They can also advise you of the sorts of information that may be relevant to any investigation.

The CMA will take steps to ensure that the information you provide is safeguarded and handled with a view to protecting your identity from disclosure.

Cartels are generally conducted in secret and they can be hard to detect and prove, which is why the CMA may offer for information. This information can help to detect, investigate and fine businesses that have been involved in cartel conduct. It can also help prosecute the people involved. 

The CMA also offers leniency to businesses reporting cartels that they are themselves involved in.

The Competition and Markets Authority (CMA) offers lenient treatment to businesses and individuals who report their role in cartel activity. Businesses who have been found guilty of cartel activity but who fully cooperate with the CMA may have their fine reduced or avoid a penalty altogether.

If you've been directly involved, the CMA encourages you to come forward first to . Call the CMA cartels hotline on Tel: 020 3738 6833.  It can provide confidential guidance.

Leniency could mean avoiding fines of up to 10% of your business's global turnover, being disqualified as a director or even going to prison.

To qualify for leniency, you must admit  your role in unlawful cartel activity and stop taking part in the cartel straight away You must co-operate fully with the CMA's investigation.  The first business to report a cartel may qualify to be safe from fines. Its current or former employees who cooperate with the CMA's investigation may also be safe from prosecution for the cartel offence. This is more likely if the cartel is one which the CMA is not already aware of.

The CMA may grant protection from prosecution to people who come forward with information about their involvement in a criminal cartel offence in the form of a 'no-action letter'.

Find further information on . 

Competition law promotes, among other things, innovation, consumer choice and lower prices for consumers and other customers.

Consumers, other customers and competitors who suffer loss from breaches of competition law may seek compensation for this by:

• bringing claims for relief in the courts against the business who committed the breach
• pursuing other means of dispute resolution such as settlement or arbitration

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