Case law: Ruling clarifies when competitors who exchange information may be in breach of competition law

Businesses should ensure they do not take part in any contact, exchange of information, or other activity with competitors that could be considered anti-competitive. They must also make sure employees and other representatives can identify such activities to ensure the business can publicly distance itself from them and/or report them, following a recent ruling.

Individuals from rival firms in the same industry held a meeting which was secretly filmed by the Competition and Markets Authority (CMA) as part of an ongoing criminal investigation. The investigation was into an anti-competitive arrangement (referred to as the 'Main Cartel') between all but one of the businesses at the meeting. The other business was a newcomer to the industry which had been invited to the meeting by the others to persuade it to join the Main Cartel.

At the meeting, the newcomer's representative made it clear that it did not wish to join the Main Cartel. However, he remained at the meeting for another hour during which he swapped commercially sensitive pricing information with the others, with a view to establishing higher prices across the industry. This part of the meeting was referred to by the CMA as the 'Information Exchange'

The Competition Appeal Tribunal (CAT) ruled that the newcomer had infringed UK and EU competition law by taking part in the Information Exchange, despite its refusal to join the Main Cartel. The CAT provided useful guidance on when discussions between competitors can amount to infringement of competition law. It highlighted that in this case:

  • The newcomer gave its opinion on what prices for specific products should be, and that prices generally should be higher, with the aim of increasing prices in the industry generally
  • It disclosed its own prices for specific products
  • It joined in discussions about:
    • The prices each business would quote in future for specific products
    • Future price bands for specific products
    • The price list of one of the businesses
    • Future tenders to a specific customer
  • The industry was made up of few suppliers and few customers, and contracts were substantial, so pricing was key
  • One of the businesses at the meeting actually used information the newcomer had disclosed at the meeting to change the prices in a tender it was making for a contract

The Information Exchange was, therefore, a 'concerted practice' because it had an anti-competitive object - to reduce uncertainty about how each of the participants was likely to behave in future. Those at the meeting intended the others to rely on the information; and expected it to inform their own pricing. This restricted, and was harmful to, the proper functioning of the market.

To amount to a concerted practice, there must be a causal link between what parties are alleged to have done to breach competition law (in this case, exchange information), and their future conduct in the market. The CAT gave its view that simply remaining active in the market after participating in the Information Exchange could have been sufficient to breach competition law, as there was a rebuttable presumption that the participants' conduct afterwards would be informed by what they had learnt from their competitors.

However, in this case the information disclosed by the newcomer at the meeting had led one of the participants to change its prices in a tender. This was specific evidence of a causal link between the Information Exchange and the parties' conduct on the market - so the CMA did not have to rely on the presumption.

It did not matter that the Information Exchange was a single, one-off meeting. Nor was it necessary for the CMA to show that:

  • The Information Exchange had resulted in an actual agreement between the parties, or had created an anti-competitive effect on the market
  • The newcomer's representative had any influence on his employer's pricing decisions, or even that information he provided was accurate, provided he was aware that the information made available in the meeting was likely to inform competitors' future pricing decisions. The exchange of information was enough

Overall, there had been a breach of competition law.

Operative date

  • Now

Recommendation

  • Businesses must ensure they do not take part in any contact, exchange of information or other potentially anti-competitive, activity with competitors; and that their employees and other representatives are able to identify such contacts or exchanges to ensure the business can publicly distance itself from them - and/or report them

Case ref: Balmoral Tanks Limited and Balmoral Group Holdings Limited v Competition and Markets Authority [2017] CAT 23

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