FS

The competitive spirit

Competition law and anti-competitive behaviour

Healthy business competition benefits everyone. It is not only essential to the creation of free and transparent markets where businesses can operate in a fair environment but also brings many important benefits to the consumer such as encouraging business innovation and a widening of choice, thereby enabling them to buy the goods and services they want at the best possible price.

Competition Law is designed to protect both businesses and consumers from anti-competitive behaviour. While all businesses must comply with competition law, recent research we have conducted for the Competition and Markets Authority (CMA) into UK businesses understanding of Competition Law suggests that many businesses are unclear as to what is required of them in practice and that as a consequence, the potential for anti-competitive behaviour is present.

Understanding competition law

In order to be able to comply with competition law business must have an understanding of their obligations but our research shows that less than a quarter of businesses reported that they knew Competition Law well (23%) and only 3% said they knew it very well.

There is also a significant ‘compliance gap’ in relation to Competition Law: while 85% of businesses think that they should comply with Competition Law because it is the right thing to do ethically, there is low understanding around specific anti-competitive behaviours. There is also poor knowledge of the penalties for breaking the law and how to report anti-competitive activity.

To close this gap business understanding of Competition Law needs to increase. However, to do this businesses first need to see Competition Law compliance as important to them. At the moment businesses seemed more concerned about their compliance with other areas of law such as Health and Safety and Employment than with Competition Law. Overall 19% had discussed their company’s compliance with Competition Law legal requirements, while only 6% had held training sessions on complying with Competition Law.

The potential for anti-competitive behaviour

This low level of understanding and relatively low perceived importance of Competition Law leads to the potential for anti-competitive behaviours whether by accident or design. Our research shows that 83% of businesses meet other businesses from their sector and that when they do so many discuss transactions (44%) and prices (9%). While it cannot be assumed that these particular businesses are discussing prices in a fashion that is not compliant with UK Competition Law, it does suggest that the opportunity for anti-competitive behaviours around transactions and prices is present. It should also be borne in mind that as this was research for CMA this is possibly the lower limit of what is actually occurring as some businesses might not freely admit to anti-competitive activities.

Businesses also had a perception of non-compliant behaviour among their competitors: 30% thought that the activities of other businesses in their industry put them in at least medium risk of breaching Competition Law and this figure rose to 44% among those who claimed to be familiar with Competition Law.

Our report of the key findings of the research can be found at:

https://www.gov.uk/government/publications/uk-businesses-understanding-of-competition-law