129/05    21 July 2005

Nearly a quarter of small and medium sized enterprises (SMEs) across Britain believe they are harmed by unfair practices such as cartel price fixing and collusion to set tender prices, says new research from the OFT.

The research found that one in three SMEs say they are aware of anti-competitive activities in their industries and one in five (22 per cent) feel they have been a victim of anti-competitive behaviour.

The OFT is calling on SMEs to recognise anti-competitive practices in their markets and work with the OFT to take action against companies who break competition law.

Despite the apparent high awareness of anti-competitive behaviour, only a minority of SMEs surveyed said that they would report it to the OFT or to other government regulators:

• only 22 per cent would report price-fixing agreements between competitors
• only 9 per cent would report a larger competitor trying to push them out of the market by cutting its prices to below cost.

The OFT's research shows that many SMEs may be missing out on the benefits of fair and competitive markets.  

The survey also shows that more than half of businesses feel that the industry in which they operate could increase its competitiveness. More than a third of SMEs think that new companies have difficulty entering markets and 16 per cent say they cannot compete freely and fairly for new contracts, and this figure is even higher for some industries, for example construction, at 21 per cent.

Sir John Vickers, OFT Chairman, said:

'Practices such as price-fixing and bid-rigging harm the competitiveness of our economy. SMEs have rights and obligations under competition law and can work more with the OFT to identify and stop anti-competitive behaviour. We must ensure that SMEs are informed about – and in turn inform – our work.'

During April 2005, the OFT launched the 'Championing Competition' campaign to promote the benefits of competition to SMEs and to raise awareness of their rights and responsibilities under competition legislation to help businesses avoid anti-competitive behaviour in their markets.

Professor David Storey, Director of the Centre for SMEs at Warwick Business School, who is writing a report for the OFT on SMEs and competition, commented:

'What is interesting is that even when they experience anti-competitive practices, the reaction of the small firm owner is to soldier on without turning to the authorities. But using their rights under competition laws they can level the playing field to give them a better chance to beat the competition.'

The OFT's research confirms that despite failing to take action on anti-competitive business practices, SMEs appear to understand and acknowledge the benefits of competition and the importance of fair dealing to the economy:

• 75 per cent of SMEs agreed that competition is a driver for innovation and growth
• 62 per cent agreed that a competitive environment is key to winning  and maintaining customer loyalty.

NOTE

Research by NOP World, SME Omnibus amongst 500 owners and managers of SME businesses during May 2005 nationally by telephone.

For the purposes of this research a SME is defined as a business employing between 10 and 250 employees, with a turnover under 50 million Euros for medium-sized company and under 10 million Euros for small business. 

For enquiries on the Championing Competition campaign contact:
Citigate Dewe Rogerson
Nico De Klerk:  020 7282 2827 Mobile: 07747 115 855
Direct Fax:  +44 (0)20 7638 0233

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