When does a chat with competitors become illegal?
09 October 2017
We all have discussions with counterparts in our industries. Those conversations are often vital to share knowledge, address common issues, and lobby for change. However, conversations with competitors can easily stray into dangerous territory, leading to potentially cartel behaviour.
What is a cartel? Well, many of us who watch the Netflix drama Narcos will be aware of the Medellin and Cali drug cartels. But thinking of cartels as armed drug lords entirely misses the point. Cartels can be formed between otherwise law abiding citizens discussing their frustrations and concerns over coffees and biscuits.
So what should you do if you are talking 'shop' with your counterparts at rival businesses? Well, hopefully you know that you cannot agree the prices you charge, customers you will work for or supply and the amount you will bid in tender processes.
But what about sharing information? Discussing market data is often a key part of trade meetings. However, you should never share current or future strategic plans, especially not in relation to pricing.
Which brings us to the Balmoral case. In a cartel investigation where we represented one of the parties that settled early on, Balmoral fought the decision and, when they lost, appealed.
What had they done? Well, they were invited to join an existing cartel. They were reluctant to get involved, correctly sensing that this was something they should not be involved in.
However, the conversation continued, and the representative of the business ended up being drawn into a discussion about pricing. Little did they know that the UK's competition watchdog, the CMA, was listening and recording the conversation. The conversation ended with a decision by the CMA finding that Balmoral (and the other parties) had infringed competition law, and it received a fine (upheld on appeal) of £130,000.
Here is what the court said:
"However reluctantly, Mr Joyce was then drawn into a conversation about pricing with Balmoral’s competitors which went well beyond a discussion of general market conditions or historic prices. He must have realised why Mr Snee and Mr Dean were pressing him for Balmoral pricing information and why they were disclosing to him their pricing information. He must have realised when he told them at the start that he trusted them and that they could be frank with each other; when he started noting down the prices for different tanks that they were discussing and when he answered direct questions about how Balmoral would respond to future requests for quotes that the others would rely on this information and that they would hope that he would abide by that information so that prices could stabilise and perhaps increase.”