Price fixing can manifest itself in the following ways:. Two or more companies agree to share the market between them and not be active in each other's areas. This may be a geographical division, a division by customer categories etc. Market-sharing agreements can manifest themselves in the following ways:. Two or more companies agree in advance who will bid.
Usually, it is also agreed in advance who should win the contract and at what price. Bid rigging can manifest itself in the following ways:. A number of companies or an industry agrees what or how much each company will produce or sell so as to increase prices or prevent price drops.
This can manifest itself in the following ways:. A supplier agrees to a minimum price with its dealers. Often - but not always - the supplier will, by means of threats to suspend delivery etc.
Resale price maintenance can manifest itself in the following ways:. Search Search. It is also interesting that this led to the first contested cartel prosecution - see further below. Somewhat ironically, Virgin Atlantic themselves became subject to an OFT investigation in April when Cathay Pacific sought leniency in connection with alleged price fixing discussions on the London-Hong Kong route.
But another major investigation was only a limited success. The investigation into the construction industry was triggered by an eagle-eyed auditor at Nottingham University Hospital NHS Trust whilst, in the recruitment companies' case, two of the companies blew the whistle on what was going on. Cover pricing involves a company that a was invited to bid for a contract, but b did not want to win it and c wanted to remain on the client's tender list.
This company then asks a real bidder to tell them what high 'cover' price would ensure that they did not win the contract - and then bidding at this high price. The companies successfully argued that their cover pricing was long-standing in the industry, had done little harm, and that the OFT's methodology for calculating the fines was unfair.
I do not know, but I suspect, that the OFT thought that the apparently innocent cover pricing was itself a cover for taking turns at bidding for contracts.
Once a pattern had been established, so all the likely bidders had worked out whose turn it was without needing to communicate with each other, it would then make sense for the other companies to put in apparently innocent cover prices so as to leave the field clear for the chosen winner, who need not, of course, submit a particularly competitive bid. But there is little point in having these suspicions if you can't prove them in front of the CAT.
Another high profile cartel involved around 50 UK independent schools , including Eton College, Harrow and Westminster, who shared information about their costs and so about their likely fee increases. This cartel was hardly secret and ceased as soon as the schools realised that their behaviour was illegal.
This impression was also encouraged by the failure of the BA prosecution, summarised below. Fifpro, which represents professional footballers , went to the European Courts in accusing FIFA of operating a cartel.
The case was settled in after FIFA agreed to numerous improvements in the way that the large clubs handled their players' transfers etc. It is interesting to note that pricing intentions do not have to be communicated direct from one party to another. Again, one is forced to wonder whether there might not have been a more gentle and less expensive way of bringing this 'cartel' to an end, once it had been spotted. It was reported in January that Oscar Pistorius' family firm had been charged with fixing South African agricultural prices since As so often, another company had claimed leniency as a reward for whistle-blowing.
The companies may appeal as they saw the payments as a way of avoiding litigation over the validity of GSK's patents. A group of estate agents — all based in the Burnham-on-Sea area in Somerset — had a meeting and agreed to fix their minimum commission rates at 1.
Although price comparison sites facilitate competition between suppliers such as hotels, they severely limit the ability of such suppliers to offer lower prices than shown on the comparison sites on which they pay significant commission. This tends to increase prices across the board. And Illegal Retail Price Maintenance is far from dead. The CMA in fined several musical instrument manufacturers and retailers for agreeing that such products would be sold at or above minimum prices.
The CMA leads most cartel investigations in the UK but many financial regulators do have similar powers, though they seldom use them as cartel investigations are beset with pitfalls and are best left to experts. It was therefore interesting to see the Payment Systems Regulator in take on the Mastercard and others for agreeing not to poach each other's prepaid card customers.
There has yet to be a successful contested prosecution in the UK. One problem was that individuals cannot be prosecuted successfully unless it can be shown that the person acted 'dishonestly'. The Government accordingly announced in March that it will no longer be necessary to prove dishonesty although it will still be necessary to demonstrate an intention to enter into a price-fixing etc.
This is quite a stiff test because the offence is relatively new - and one of over 3, new criminal offences introduced in the UK between and - that a defendant might well argue that most people would not regard the discussion of prices with competitors to have been dishonest. Given that some cartels involve only informal communication, and that others are motivated by crisis or avoiding bankruptcy, the issue of dishonesty is clearly central to any prosecution.
A YouGov survey, commissioned by the University of East Anglia's Centre for Competition Policy in , showed that only 6 in every 10 Britons felt price fixing was dishonest, and only 1 in 10 felt imprisonment was an appropriate sanction. The issue raised enough concern in Australia for dishonesty to be dropped from the design of its criminal offence altogether. Some expert observers therefore wonder whether imprisonment can be a workable sanction at all, outside the context of US Anti-trust enforcement.
Plea Bargains negotiated by US authorities, under the shadow of a full trial, play an instrumental role in regularly securing custodial sentences for antitrust violations. But a US-style system of plea bargaining does not exist in the UK. It was originally hoped that the criminal offence, introduced in the UK by the Enterprise Act , would lead to around six to ten prosecutions a year Penrose Report, at 3. But only three executives have been convicted so far - and this was in the Marine Hoses case where the investigation and plea bargaining had taken place in the US.
Indeed, the first contested prosecution - of BA executives see above - did not reach the courts until April and then collapsed before the prosecution had even begun to offer any evidence, mainly because Virgin found a large number of relevant emails only as the trial was starting, and it was not possible to analyse them properly without unacceptable further delay. The ACCC is responsible for investigating cartel conduct, managing the immunity process and referral of serious cartel conduct to the CDPP for consideration for prosecution.
The CDPP is responsible for prosecuting offences against Commonwealth law, including serious cartel offences, in accordance with the Prosecution Policy of the Commonwealth. As noted in the MOU, the ACCC is more likely to consider conduct it is investigating to be serious cartel conduct if one or more of the following factors apply:.
If you are invited into an arrangement that seems like a cartel, you should seek independent legal advice and notify the ACCC.
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Home Business Anti-competitive behaviour. Cartels Businesses that make agreements with their competitors to fix prices, rig bids, share markets or restrict outputs are breaking laws and stealing from consumers and businesses by inflating prices, reducing choices and damaging the economy.
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