82/13 12 December 2013
The company which owns Quantum Pharmaceutical Limited (Quantum) and Total Medication Management Services Limited (trading as Tomms Pharmacy - 'Tomms'), has agreed to pay over £380,000 for breaching competition law in relation to the supply of prescription medicines to care homes throughout England.
The settlement announced today relates to an OFT investigation into a market sharing agreement between Quantum and Lloyds Pharmacy Limited (Lloyds), a subsidiary of Celesio AG, over the supply of prescription medicines to care homes between May 2011 and November 2011.
Under this market sharing agreement, the companies agreed that Tomms would not supply prescription medicines to existing Lloyds' care home customers. In return, for at least some of the time, Lloyds also agreed not to supply prescription medicines to existing Tomms' care home customers.
The case was brought to the OFT's attention by Lloyds under the OFT's leniency policy. Under the policy, a company which is the first to report its participation in a cartel may qualify for immunity from fines. Provided it continues to co-operate with the OFT, Lloyds is not expected to pay a fine.
Hamsard 3149 Limited (Hamsard), which owns Quantum and Tomms, has agreed to pay a penalty of £387,856.
The penalty was reduced from £646,426 to reflect Hamsard's admission and agreement to co-operate under the OFT's leniency policy and in light of the settlement. A party under investigation can enter into settlement with the OFT if it is prepared to admit that it has breached competition law and is willing to agree to a streamlined administrative procedure. In return, the OFT may agree to impose a reduced penalty on the business.
Ann Pope, OFT Senior Director, Services, Infrastructure and Public Markets Group, said:
'These two companies have admitted to entering into a cartel to reduce competition for supplies to care homes, which look after some of the most vulnerable members of society. We consider this type of market sharing to be a serious breach of competition law.
'We will take strong action against companies that collude to deny customers the benefit of fair competition.
'This case also underlines the benefits of acting quickly and co-operating at the earliest opportunity, to qualify for immunity from, or a reduction in, fines.'
- Hamsard has agreed to pay the OFT a total of £387,856. The penalty was reduced from £646,426 owing to the company's admission and agreement to co-operate with the OFT.
- The OFT's investigation was conducted under the Competition Act 1998 which gives the OFT the power to impose penalties on companies of up to 10 per cent of their worldwide turnover for breaches of competition law.
- The Competition Act 1998 prohibits agreements, practices and conduct that may have a damaging effect on competition in the UK. The Chapter I prohibition covers anti-competitive agreements and concerted practices, that have the object or effect of preventing, restricting or distorting competition in the UK (or a part thereof). Its European counterpart, Article 101 of the Treaty on the Functioning of the European Union, covers equivalent agreements or practices which may affect trade between EU Member States.
- Under the OFT's leniency policy an undertaking may be granted immunity from penalties or a significant reduction in penalty in return for reporting certain categories of Competition Act infringement and assisting the OFT with its investigation. Lloyds is expected to be granted immunity from penalties as it informed the OFT of the infringement before the OFT had commenced its investigation.
- In calculating financial penalties, the OFT takes into account a number of factors including the seriousness of infringement, the relevant turnover and any mitigating and/or aggravating factors. The basis of the OFT's considerations are set out in OFT's guidance as to the appropriate amount of a penalty.
- The penalty will be only payable if (following a Statement of Objections) the OFT proceeds to issue an infringement decision, to be published in due course. The full details of the penalty calculation will be included in the infringement decision. The level of penalty reflects Hamsard's application for leniency, plus a further reduction in recognition of Hamsard's admission and the further co-operation it has agreed to enable the case to be resolved more speedily and effectively.
- Anyone who has reason to suspect that a cartel is operating should telephone the OFT's cartel hotline 0800 085 1664 or email email@example.com. Companies or individuals wishing to apply for leniency should see Leniency - confess your cartel to the OFT.
- In April 2014, the Competition and Markets Authority (the CMA) will become the UK's lead competition and consumer body. The CMA will bring together the existing competition and certain consumer protection functions of the Office of Fair Trading and the responsibilities of the Competition Commission, as amended by the Enterprise and Regulatory Reform Act 2013. The CMA, which is a non-Ministerial government department, was established on 1 October 2013 and will be taking on responsibility for cases and market studies from 1 April. See the CMA's home page for more information.
- The OFT currently has 12 cases open under the Competition Act 1998.