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When times are hard and company survival is at stake, firms need to be sure that their usual discussions with buyers and suppliers do not spill over into anti-competitive behaviour.
It is absolutely normal for suppliers and buyers to exchange information before they reach an agreement. If they didn’t, commercial life as we know it could not exist.
But suppliers and buyers could get into trouble if they exchange information that could be used to fix the buyer’s resale prices for end customers.
Again, it is quite normal for competitors in the same industry to publish certain information to help investors, or potential investors, to judge the general health of the industry.
But if current or potential competitors release information that makes it easier to predict each other’s behaviour and adjust their own in the light of this, they are almost certain to be breaking competition rules.
When direct competitors talk directly to each other about pricing issues – as British Airways and Virgin Atlantic did over fuel surcharges, for example – the competition authorities will come down hard.
UK and US regulators fined British Airways £270 million over its part in the price-fixing. Virgin Atlantic escaped the fine from the regulator as it blew the whistle on the cartel.
Small firms are as likely as large ones to fall victim to the competition authorities, especially during a recession. I therefore advise businesses never to:
• attempt to fix prices or terms of trade;
• agree to limit production to reduce competition;
• carve up markets by, for example, agreeing with a competitor that you will bid for one contract and they will take another; or
• discriminate between customers, for example by charging different prices or imposing different terms where there is no difference in the circumstances of supply.
Remember, too, that the Competition Act covers informal, unwritten contracts as well as formal and written ones. Never be tempted into a “gentlemen’s agreement” that prevents, restricts or distorts competition. It could cost you a hefty fine, a spell in jail – and your entire business reputation.
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