Price fixing is when competitors agree to charge customers the same prices. It is illegal in the UK because it restricts competition in the same market, often driving prices up. Price fixing can result in both civil and criminal penalties, including up to five years’ imprisonment.
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If you are facing allegations of cartel and price fixing, please contact us at Ashmans Solicitors. Our fraud and financial crime lawyers can defend you throughout proceedings. We are available to take your call 24 hours a day, 7 days week.
What is the legal definition of price fixing?
Price fixing is when companies who would ordinarily compete with each other agree to charge customers the same prices.
The practice of price fixing is outlawed in many countries because it is anti-competitive and anti-consumer.
Ordinarily, businesses compete with each other to win customers, which in turn keeps prices in check. Although the cost of goods and services can rise and fall, prices are determined by supply and demand, rather than artificial forces.
With price fixing, however, companies agree to set the price of goods or services. The agreement could be to raise, lower or freeze prices. This typically means that the customer ends up paying higher prices, or that new companies cannot enter the market.
The decision to price fix may be set out in a written agreement or a verbal agreement (also referred to as a gentleman’s agreement). Either way, it is illegal in the UK.
Is price fixing illegal in the UK?
Price fixing is illegal in the UK, as is bid rigging, market sharing and abusing a dominant position in the market.
Price fixing is considered a cartel offence. The word ‘cartel’ is often associated with drug offences. However, a cartel is actually defined as ‘a group of similar companies who agree prices between them in order to increase profits and limit competition’. These companies can be in any market or industry, including those that are otherwise legal enterprises.
The Enterprise Act 2002
In England and Wales, being involved in a cartel is an offence under section 188 of the Enterprise Act 2002. The legislation states that:
(1) An individual is guilty of an offence if he… agrees with one or more other persons to make or implement, or to cause to be made or implemented, arrangements of the following kind relating to at least two undertakings (A and B).
(2) The arrangements must be ones which, if operating as the parties to the agreement intend, would—
(a) directly or indirectly fix a price for the supply by A in the United Kingdom (otherwise than to B) of a product or service,
(b) limit or prevent supply by A in the United Kingdom of a product or service,
(c) limit or prevent production by A in the United Kingdom of a product,
(d) divide between A and B the supply in the United Kingdom of a product or service to a customer or customers,
(e) divide between A and B customers for the supply in the United Kingdom of a product or service, or
(f) be bid-rigging arrangements.
Previously, the law stated that the individuals in question must have made such an agreement dishonestly. However, the law was amended in April 2014 to remove the requirement to prove dishonesty.
What are the penalties for price fixing?
Pricing fixing can result in both civil and criminal penalties.
Companies that are found guilty of price fixing can be fined up to 10% of their global turnover. The authorities may also seize assets and order the company to pay all the legal costs. These cases are often multi-jurisdictional, so proceedings may be initiated in various countries.
Companies cannot face criminal prosecution. However, company directors, employees and any other individuals involved in price fixing can be prosecuted. If found guilty, a defendant can expect to face an unlimited fine and up to five years’ imprisonment.
Company directors may also be struck off, meaning they are unable to work as a director for between two and 15 years.
The first price fixing prison sentences in the UK
Those convicted of price fixing will be sentenced according to the court’s discretion. This may or may not involve a period of imprisonment. However, custodial sentences have been given in the past, the first of which occurred back in 2008.
The case involved three former executives of a company that sold marine hoses. They were convicted of being part of a cartel that fixed the prices of hoses, resulting in customers paying at least 15% more than the competitive price at the time. The three individuals were given sentences ranging between 30 and 36 months in prison, although these were reduced to 20-30 months on appeal.
This particular cartel operated across a number of countries, so proceedings were also initiated outside the UK. The EU imposed fines totalling €131 million, while cartel members based in the US were fined a total of $12.3 million.
How are sentences decided for cartel and price fixing?
If a defendant is found guilty of cartel and price fixing in England or Wales, their sentence is decided by a judge. The judge refers to sentencing guidelines when making their decision. The guidelines set out the recommended punishment based on the offender’s culpability, harm, mitigating factors and aggravating factors.
Sentences can be reduced on account of an early guilty plea.
Leniency for whistle-blowers
Cartel members who ‘blow the whistle’ on price fixing practices may be protected from prosecution in return for full disclosure of antitrust violations. This mirrors the amnesty program in the US, where the authorities show leniency to those who provide incriminating evidence in cartel cases.
Who investigates price fixing?
Various authorities in the UK investigate cartel membership and price fixing. This includes:
- The Competition and Markets Authority (CMA)
- The Serious Fraud Office (SFO)
- The Financial Conduct Authority (CFA) (previously the Office of Fair Trading or OFT)
- The police, particularly the City of London Police
These authorities have a wide range of powers. They can conduct dawn raids, search premises, seize assets and conduct interviews under caution. They can also request restraint orders from the courts. If granted, assets may be frozen until the conclusion of the investigation or prosecution.
Are you under investigation for price fixing?
If you or your company is under investigation for cartel and price fixing, you need to get immediate legal advice. You might be invited for an interview under caution, or you might be subject to a dawn raid. Whatever the circumstances, legal representation is essential.
Our fraud and financial crime solicitors can represent you throughout proceedings. We understand the reputational damage such allegations can have on a company, not to mention the personal strain you will be under. We work tirelessly to get you the best possible outcome.
Contact us as soon as you realise that you are under investigation. We will accompany you to interviews under caution, advising you what questions to answer. We will make sure that anything you say (or do not say) cannot be misconstrued and used against you.
If criminal charges are laid, we will provide clear, strategic advice. Our solicitors work with leading counsel and can present a robust defence to the court. We can also argue against restraint orders and other potential consequences.
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