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Regulator begins new sector-focused crackdown on cartels

Out-Law News | 27 Feb 2018 | 5:13 pm | 2 min. read

The UK's Competition and Markets Authority (CMA) will target "industries that are at a greater risk of cartels forming" as part of a new campaign to crack down on anti-competitive behaviour.

Construction, manufacturing and business support services have either a history of repeated cartel activity, or characteristics that make them vulnerable to cartel-type behaviour, according to the CMA.

The regulator is hoping to encourage more whistleblowers with concerns about cartels to come forward, as well as to raise awareness of the opportunities for leniency for those who self-report cartel activity. Those who come forward with information about their involvement in a cartel can receive significant reductions in fines and avoid being disqualified from running a company, and may even be able to avoid criminal prosecution if they are the first to come forward.

The number of tip offs received from whistleblowers about cartels received by the CMA has increased by 30% since the launch of its first public-facing digital advertising campaign, which included sponsored social media posts, last year. The government has since awarded the regulator an additional £2.8 million for its enforcement activity.

"We are committed to tackling cartels wherever we find them," said Stephen Blake, the CMA's senior director for cartels.

"More people are reporting illegal activity to us and we urge anyone with information to come forward. If you're involved, it's better to be safe, not sorry and to tell us about it first - before someone else does. For those who were not involved but have witnessed illegal activity, we urge them to do the right thing," he said.

Any information received from whistleblowers would be treated confidentially, with the identity of the whistleblower kept secret, he said.

Competition law expert Alan Davis of Pinsent Masons, the law firm behind Out-Law.com, said: "ideally, any company’s objective should be to encourage employees to come forward with their concerns or suspicions internally so that the company can itself apply to the CMA for leniency or immunity which will also protect all its current and past employees, rather than an employee going directly to the CMA to blow the whistle which does not protect the company or other employees".

"Whistleblowers also need to be aware of the high burden of cooperation with the CMA's investigation that is required as a condition of immunity or leniency, and which may last for several years," he said.

Businesses involved in cartels agree not to compete with each other, cheating customers by allowing them to keep prices high. Businesses found to have been involved in illegal cartels can be fined up to 10% of their annual global group turnover, while individuals can face up to five years in prison and directors disqualified from holding director positions for up to 15 years.

The CMA has issued £151m in fines following successful investigations into anti-competitive practices over the past two years, and is currently investigating 15 cases where competition law may have been broken.

Recent successes for the regulator include a £2.6m fine imposed on water tank firms, a £370,000 fine imposed on Somerset estate agents and a £160,000 fine and director disqualification order against an Amazon marketplace seller which agreed to fix the prices of popular posters and frames with a competitor. In the last of these cases, the competitor reported the cartel activity to the CMA and received immunity.

The CMA has produced a dedicated website featuring videos, short guides and case studies to explain what cartels are and how to report them. It said that UK workers tended to know little about them, putting them and their companies at risk.