Opinion: Allowing markets to function effectively

  • 15 Apr 2020

By Dr Andrea Coscelli, Chief Executive of the Competition and Markets Authority (CMA)

Most people go into business wanting to be a success and make money. The reward of beating the competition spurs entrepreneurs to innovate, work hard and give their customers the best deal. However, it is vital that SMEs understand and follow competition law rules. 

The Competition and Markets Authority (CMA) helps ensure you can compete freely and to the best of your abilities – that’s why we introduced remedies in the retail banking and energy sectors and took onboard the challenges faced by SMEs that FSB raised with us.

If your competitors are providing more efficient products and services, you will have to respond with greater efficiency. This facilitates a competitive marketplace, which provides consumers with choice and value. Competition rules also help smaller players challenge bigger rivals and break into markets. 

 

The public loses trust in markets where there is known to be cheating, as do honest businesses – they cannot compete on a level playing field and feel the impact of the negative reputational fallout caused by those acting illegally.  

Our research reveals that:

  • Only 57 per cent of those polled know it is illegal to fix prices, and 41 per cent don’t know that attending a meeting where rivals agree prices is illegal
  • 59 per cent don’t know that agreeing to split up and share customers with competitors is illegal
  • 48 per cent don’t know that bid-rigging – where competing bidders secretly agree who will win a contract and submit fake bids – is illegal. 

These misconceptions should ring alarm bells, as the consequences of breaking the law are serious: 

  • Businesses can be fined up to 10 per cent of their annual worldwide turnover 
  • Directors can be disqualified from acting as directors for up to 15 years
  • Individuals can face personal fines
  • In the most serious criminal cases, individuals can face prison.

The CMA is currently investigating 25 competition cases and issued £43.6 million in fines last year. With 12 directors already disqualified and more under investigation, the risk of director disqualification for those who break the law has never been higher.

However, competition law risk remains low on boardroom agendas – just 18 per cent of those we polled said their business had senior level discussions about it. But we know that most businesses want to do the right thing – 80 per cent of those we polled say complying with competition law is the right thing to do ethically.  

We’ve produced guidance that you can easily apply to your day-to-day business practice, working with the FSB to ensure it is small business-friendly.

 

Our ‘Cheating or Competing’ campaign (gov.uk/cheating-or-competing) features an updated campaign page with bite-sized advice to help you understand and recognise anti-competitive business behaviours.

If you think you may be at risk of breaking the law, seek independent legal advice directly.

Dr Andrea Coscelli is the Chief Executive of the Competition and Markets Authority (CMA). Views expressed are those of the author and not necessarily those of FSB.

 

 

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