Competition Law – Fines for SMEs

A recent decision by the Competition and Markets Authority (CMA) shows that businesses of all sizes must take competition law seriously. The decision also shows the dangers of regarding the Net as some kind of legal wild west where that breaches of competition law by SMEs will slip safely under the radar.

Under the Competition Act 1998 a small agreement – i.e. an agreement make between parties whose combined turnover does not exceed £20m which is not a price fixing agreement – is immune from fines. However, the CMA has power to withdraw the immunity in individual cases.         

The CMA’s decision to withdraw immunity concerned a mobility scooter supplier. The CMA considered that the supplier’s agreements with three online retailers prevented the retailers from advertising prices of supplier branded mobility scooters online or from advertising them below specified prices. The agreements had been made despite a previous letter sent by the CMA to mobility scooter suppliers warning of the unlawfulness of such behaviour, and after previous infringement decisions against other suppliers for similar behaviour.

This decision is interesting in that it is the first time immunity has been withdrawn so early in an investigation. In announcing the decision Ann Pope, senior director for antitrust enforcement at the CMA, said:

“The internet is an increasingly important distribution channel and people are held back from finding the best deal if retailers are prevented from advertising their prices online.

Businesses of all sizes need to take competition law seriously. We will withdraw immunity from small businesses, exposing them to the risk of fines, if we think it is necessary – particularly where previous warnings have been ignored.

This case shows that the CMA is prepared to act decisively to enforce competition law. It is also important to appreciate that even whilst the immunity remains in place, it is limited to liability for fines. As this case shows, the immunity does not stop the CMA investigating breaches of the law. In any case, any agreement that breaches competition law will be void and unenforceable. There is also the risk of third party claims for an injunction and/or damages.

If you would like to know more, please contact Nick Crook or David Dees.