What is prohibited?

Information for businesses about anti-competitive agreements.

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• Anti-competitive agreements
• Abuse of a dominant market position
• Penalties

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Anti-competitive agreements

The Competition Act 1998 prohibits anti-competitive agreements between companies. In particular, you must not:

• agree to fix prices or terms of trade, for example agreeing price rises with your competitors
• limit production in order to reduce competition
• carve up markets or suppliers, for example agreeing with a competitor that you’ll bid for one contract and they’ll take another
• discriminate between customers, for example charging different prices or imposing different terms where there is no difference in what you’re supplying.

Any agreement that restricts or distorts competition is covered (not just the types of agreement listed above). An agreement may be formal (such as legally binding contracts) or informal (such as unwritten 'gentlemen's agreements'). The Act mainly applies to agreements between businesses with a significant combined market share. But even the smallest businesses need to avoid getting involved in anti-competitive agreements, such as cartels.

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Abuse of a dominant market position 

The Competition Act also prohibits abuse of a dominant market position. For example businesses must not impose unfair prices on customers or suppliers. This mainly applies to businesses that have a large market share.

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Penalties

The OFT has extensive powers to investigate suspected breaches of competition law and take action. Penalties can include fines of up to 10 per cent of a company’s annual worldwide turnover. Also, directors can be disqualified, given an unlimited fine or even imprisoned.

In addition to any penalty imposed, customers and competitors may be able to sue companies that break the law.

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