The Mercedes CV price-fixing case continues to exercise a weird sort of fascination over the industry, and the powers that be are not going to allow anyone to forget it in a hurry: part of their job is, naturally, to keep people worried enough that they will make sure they don't put a foot wrong. That's what deterrence is all about. To keep us all on our toes, the Competition and Markets Authority - successor to the Office of Fair Trading - has recently written a billet doux to the motor industry.
The letter tells us a little more about the case than perhaps we knew already, and offers some very sensible guidance to avoid getting into similar trouble. It also encourages us all to report cartel activity if we ever encounter it: making sure the playing field is level is not a purely altruistic thing, it can also be beneficial at a selfish level.
In the CV case (let's stop mentioning names), the letter tells us, among the breaches of competition rules was an agreement between two dealers that they would add a substantial margin if a customer dared to seek a quotation from the one in whose territory he was not established. Another pair of dealers agreed not to prospect for customers in each other's territories. It would be laughable if it didn't show a frightening level of ignorance about competition rules (or a reckless disregard for their effect).
The letter makes the important point that the boundary between legitimate contacts with competitors and illegitimate ones can be hard to discern. Informal relationships between staff members in competing businesses can be rife with problems, which can be recognised by considering whether competing businesses are indeed free to set their trading strategies independently. And members of a franchise must remember that, while they might look as if they are all on the same side, they are in fact competing with other members of the network (and perhaps the manufacturer too - but that's another story).
The law on cartels covers even minor involvement. Attending a single meeting can lead to problems. Organising a meeting is, of course, likely to be worse. And small businesses are not exempt from the rules: the only concession to them is that financial penalties are based on turnover. When we are talking abut cartels, the general rule on agreements of minor importance - the so-called de minimis rule (de minimis non curat lex, if we were still allowed to use Latin) - doesn't apply: cartels are never minor. Individual offenders can even be imprisoned, for up to five years, and fined without limit: directors can be disqualified for 15 years.
Because cartels are by definition secretive, the authorities find it hard to learn about their existence. They depend in part on members 'whistle-blowing', and offer leniency for those who do. But even a cartel member who doesn't blow the whistle can be treated leniently if they provide important information. Individuals who provide information can be rewarded, and handsomely: up to £100,000. Almost worth forming a cartel for ... but please note: that was written tongue-in-cheek, and wouldn't work.
The CMA's closing piece of advice is particularly striking: if you think your employer is involved in a cartel, tell them (the CMA) - before someone else does. Only the first whistle-blower is treated leniently - later imitators have nothing new to offer to the CMA.
The letter tells us a little more about the case than perhaps we knew already, and offers some very sensible guidance to avoid getting into similar trouble. It also encourages us all to report cartel activity if we ever encounter it: making sure the playing field is level is not a purely altruistic thing, it can also be beneficial at a selfish level.
In the CV case (let's stop mentioning names), the letter tells us, among the breaches of competition rules was an agreement between two dealers that they would add a substantial margin if a customer dared to seek a quotation from the one in whose territory he was not established. Another pair of dealers agreed not to prospect for customers in each other's territories. It would be laughable if it didn't show a frightening level of ignorance about competition rules (or a reckless disregard for their effect).
The letter makes the important point that the boundary between legitimate contacts with competitors and illegitimate ones can be hard to discern. Informal relationships between staff members in competing businesses can be rife with problems, which can be recognised by considering whether competing businesses are indeed free to set their trading strategies independently. And members of a franchise must remember that, while they might look as if they are all on the same side, they are in fact competing with other members of the network (and perhaps the manufacturer too - but that's another story).
The law on cartels covers even minor involvement. Attending a single meeting can lead to problems. Organising a meeting is, of course, likely to be worse. And small businesses are not exempt from the rules: the only concession to them is that financial penalties are based on turnover. When we are talking abut cartels, the general rule on agreements of minor importance - the so-called de minimis rule (de minimis non curat lex, if we were still allowed to use Latin) - doesn't apply: cartels are never minor. Individual offenders can even be imprisoned, for up to five years, and fined without limit: directors can be disqualified for 15 years.
Because cartels are by definition secretive, the authorities find it hard to learn about their existence. They depend in part on members 'whistle-blowing', and offer leniency for those who do. But even a cartel member who doesn't blow the whistle can be treated leniently if they provide important information. Individuals who provide information can be rewarded, and handsomely: up to £100,000. Almost worth forming a cartel for ... but please note: that was written tongue-in-cheek, and wouldn't work.
The CMA's closing piece of advice is particularly striking: if you think your employer is involved in a cartel, tell them (the CMA) - before someone else does. Only the first whistle-blower is treated leniently - later imitators have nothing new to offer to the CMA.
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