Rules about Cartels

The rules on cartels do not only relate to large businesses and corporations. In fact, cartel regulations also apply to organisations and companies of any size. The most common types of cartels include:

• Bid rigging
• Market sharing
• Price fixing
• Sharing information

All these types of agreements are illegal – no matter whether they are verbal or made in writing. In fact, planning such an agreement – even as an informal conversation with another business – would be breaking the law. The so-called ‘gentlemen’s agreement’ would be illegal even if it does not get carried out.

Note: There are legal ways of working with other businesses that do not breach competition law. You may need to get legal advice or contact the Competition Pro Bono Scheme for further information on managing any risks.

Bid Rigging

Bidding for contracts is a major activity for certain types of businesses. But, discussing your bid for a contract tender with any of your competitors would be an illegal activity. Common types of bid rigging include:

• Agreeing not to bid against other businesses or agreeing to withdraw your bid.
• Agreeing to take turns with competitors to win tenders or contracts.
• Making an agreement with your competitors on how much you propose to bid for a contract. The same rule would apply to sharing details or information about your bids.
• Making payments to other businesses to stop them bidding or paying them after you win the tender.
• Schemes that involve ‘cover bids’ or ‘complementary bids’. Complementary bidding is the practice of asking other businesses to make a bid even though they do not want to win the contract.

Sharing Commercially Sensitive Information

You must not share information with other businesses in an attempt to reduce the competition. So, for example you cannot share information about:

• Prices
• Production
• Markets you sell to (or plan on selling to)
• Your suppliers, customers, or any contractors

Note: Similar rules on agreeing not to compete with another business also apply to sharing information through a third party, such as a trade association.

Price Fixing

Businesses should set out their pricing structures on an individual bases. Thus, discussing the prices that you will charge with any of your competitors would be illegal. So, to avoid anti-competitive activity, you should::

• Not agree on offering discounts with your competitors or increasing your prices at the same time.
• Not charge the same fees to any intermediaries (e.g. retailers who sell your products).
• Not make an agreement with your competitors to charge the same prices to customers.

Abusing a Dominant Position

Your business may be guilty of abusing dominance of its position in the market if:

• It has more than a 40 percent of the market share.
• Normal competitive restraints do not affect it.

The abuse of a dominant position may also apply if you conduct unfair practices to other businesses or to your customers. Typical examples include:

• Charging low prices that fail to cover the costs in an attempt to drive out the competitors.
• Forcing customers to buy products that they do not want (e.g. making them take warranties on electrical products).
• Treating ‘similar’ customers ‘differently’ (e.g. offering different price structures or trading terms to similar types of customers).

Other Anti Competitive Practices to Avoid

Knowing how to avoid and report anti competitive activity is vital for business performance and innovation. You must take steps to avoid all other activities that fall foul of competition laws, such as:

• Buying or selling as a joint agreement with your competitors.
• Making agreements with your competitors to reduce production of an item to try and raise its market value.
• Placing restrictions on the price that businesses can sell your product.
• Agreeing with competitors not to sell goods or services to certain customers or not to deal with certain suppliers.
• Setting up long-term exclusive contracts with any of your customers or your suppliers