When does information sharing become collusion? The line isn’t between the two isn’t easy to walk but you’ll pay the price if you don’t
Newspaper stories alleging price collusion in the grocery industry seem to be ten a penny at the moment. Last week’s fines of more than £130m for six companies accused of colluding over the price of tobacco come in the wake of global allegations of antitrust violations in the dairy, exotic fruit, flour and bread sectors.
Separating the media bluster from the antitrust blunders is no easy task. Neither is being sure those well-intentioned efforts to stabilise income or co-operate better with the next link in the chain don’t fall on the wrong side of the line in terms of competition law.
At least as far as tobacco goes, the OFT has now indicated where that line is. In April, several supermarkets, including Tesco, Asda, Sainsbury’s, Morrisons and Somerfield, and two tobacco manufacturers, Gallaher and Imperial Tobacco, were accused of indirectly exchanging proposed retail prices and making arrangements to restrict the ability of each retailer to determine prices independently.
Asda, Somerfield, Threshers owner First Quench and Gallaher have now reached an early resolution with the OFT by admitting their wrongdoing. Although their penalties have been discounted, the fines nevertheless amount to more than £130m, a figure that may rise further as the investigation into Tesco, Morrisons, Shell, The Co-operative Group and Imperial Tobacco continues. Sainsbury’s won’t be fined as long as it continues to assist the investigation: blowing the whistle clearly has advantages.
It’s a similar story in the dairy sector. Last September, the OFT accused several supermarkets and dairy processors of collusion. Asda, Dairy Crest, Sainsbury’s and Morrisons (in relation to Safeway) have already admitted their involvement and fines of more than £120m have been levied.
The OFT’s position is that the exchange of commercially sensitive price information restricts competition even if the purpose, as claimed in this case, is to try and ensure a fair price is passed to the farmer. The book has not yet been closed on this investigation either and if any of the remaining parties are found guilty, they face even more punitive fines, having failed to come clean at an early stage.
And regulatory penalties are not the only thing to fear. Brand image can be severely undermined by price-fixing charges, not to mention the increasing threat of private damages actions from parties who may have lost out. This regulatory crackdown highlights the dangers of exchanging information. The key is knowing how much of what to share with whom.
If information is being shared with a competitor, you should proceed with caution. If the information makes it easier to predict the behaviour of the other party and adjust your own accordingly, you should consider whether it is appropriate to exchange it at all. The age of the information, the format and the frequency of the exchange can all influence whether the line is crossed. If in doubt, think twice, check with senior management, review your competition compliance policy and proceed carefully.
When it comes to food, the OFT is not picky. Nor are regulators in other countries, with chocolate, coffee, cereal, bananas and pineapples all on the antitrust ‘fixed price’ menu. With so many products and such big names under scrutiny, rest assured the headlines will continue to flow.
Sarah Hoskins is a solicitor in the EU competition & regulatory practice of Maclay Murray & Spens
Newspaper stories alleging price collusion in the grocery industry seem to be ten a penny at the moment. Last week’s fines of more than £130m for six companies accused of colluding over the price of tobacco come in the wake of global allegations of antitrust violations in the dairy, exotic fruit, flour and bread sectors.
Separating the media bluster from the antitrust blunders is no easy task. Neither is being sure those well-intentioned efforts to stabilise income or co-operate better with the next link in the chain don’t fall on the wrong side of the line in terms of competition law.
At least as far as tobacco goes, the OFT has now indicated where that line is. In April, several supermarkets, including Tesco, Asda, Sainsbury’s, Morrisons and Somerfield, and two tobacco manufacturers, Gallaher and Imperial Tobacco, were accused of indirectly exchanging proposed retail prices and making arrangements to restrict the ability of each retailer to determine prices independently.
Asda, Somerfield, Threshers owner First Quench and Gallaher have now reached an early resolution with the OFT by admitting their wrongdoing. Although their penalties have been discounted, the fines nevertheless amount to more than £130m, a figure that may rise further as the investigation into Tesco, Morrisons, Shell, The Co-operative Group and Imperial Tobacco continues. Sainsbury’s won’t be fined as long as it continues to assist the investigation: blowing the whistle clearly has advantages.
It’s a similar story in the dairy sector. Last September, the OFT accused several supermarkets and dairy processors of collusion. Asda, Dairy Crest, Sainsbury’s and Morrisons (in relation to Safeway) have already admitted their involvement and fines of more than £120m have been levied.
The OFT’s position is that the exchange of commercially sensitive price information restricts competition even if the purpose, as claimed in this case, is to try and ensure a fair price is passed to the farmer. The book has not yet been closed on this investigation either and if any of the remaining parties are found guilty, they face even more punitive fines, having failed to come clean at an early stage.
And regulatory penalties are not the only thing to fear. Brand image can be severely undermined by price-fixing charges, not to mention the increasing threat of private damages actions from parties who may have lost out. This regulatory crackdown highlights the dangers of exchanging information. The key is knowing how much of what to share with whom.
If information is being shared with a competitor, you should proceed with caution. If the information makes it easier to predict the behaviour of the other party and adjust your own accordingly, you should consider whether it is appropriate to exchange it at all. The age of the information, the format and the frequency of the exchange can all influence whether the line is crossed. If in doubt, think twice, check with senior management, review your competition compliance policy and proceed carefully.
When it comes to food, the OFT is not picky. Nor are regulators in other countries, with chocolate, coffee, cereal, bananas and pineapples all on the antitrust ‘fixed price’ menu. With so many products and such big names under scrutiny, rest assured the headlines will continue to flow.
Sarah Hoskins is a solicitor in the EU competition & regulatory practice of Maclay Murray & Spens
No comments yet