Cartels and the Law
UK competition law & cartel agreements
A cartel is a formal agreement between businesses involving anti-competitive behaviour, often through price fixing agreements creating a disadvantage to outside competitors, whilst frequently exploiting the consumer. The prices charged in sale are set to suit the agreement or, in other cases, buying prices used for suppliers can be fixed forcing higher profit margins. Examples can include:
- limiting or obstructing production or services with the intent of risen prices as a result
- the agreement of other contract terms, i.e. credit periods or discounts
- the fixing of bids in contracts as opposed to honest competition through a legitimate bidding system
- the agreement to distribute customers between the members of the cartel
Prohibited by law, cartel agreements can have serious consequences, with offending businesses receiving a penalty fine of up to 10 per cent, with some individuals being held in court and receiving prison sentences of up to five years.
The promoted view of cartels from the Office of Fair Trading (OFT) is that it is the most serious form of anti-competitive agreement and it is keen to uncover them. Leniency for those involved in reporting a Cartel or any anti-competitive behaviour is considered. Often businesses that do report any cases involving themselves can be offered a reduced fine or immunity from prosecution.
Financial rewards of up to £100,000 in some circumstances can be distributed in exchange for information regarding cartel activity.
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