How do i comply with the competition rules?

15-Oct-2008

A current investigation by the NHS Counter Fraud department into (unsubstantiated) allegations that suppliers of NHS locums may be involved in a price-fixing cartel should remind all recruiters about the perils of price fixing.


What are competition laws for?

UK competition rules should prevent UK competition from being restricted or distorted by the actions of businesses. This means that businesses should act independently of one another, and supply and demand alone should determine the prices and terms and conditions at which recruitment services are provided.

Competition compliance is monitored in the UK by the Office of Fair Trading. Failure to comply can have severe consequences such as:

• fines of up to 10% of worldwide turnover of the infringing organisation

• agreements that infringe competition laws may be unenforceable (giving suppliers no right to payment)

• third parties who suffer loss as a result of anti-competitive behaviour can recover damages from the infringing organisation

• investigations attract adverse publicity and cost time and money

• individuals involved face criminal sanctions and directors face disqualification.

Suspected non-compliance can involve dawn raids on your home by the authorities, massive fines and, at the very least, serious issues of reputation.


What is anti-competitive behavior and how can it be avoided?

As soon as you are dealing with a competitor, alarm bells should ring. Anti-competitive practices can include price fixing, involvement in a cartel and refusal to supply. This is a particular issue for those in the recruitment industry where a business may find itself at different stages in the supply chain: your competitors one day may be your managed services clients the next.

Here are some ‘dos’, ‘don’ts’ and ‘think carefullys’ that recruitment professionals should consider to minimise the risk of infringing competition laws, and some suggestions of good practice to help manage that risk.


DONT…

• contact a competitor or attend any sort of meeting to discuss pricing or margins, or otherwise exchange financial or client-based information with competitors, even if it is based on historic sales, discounts or terms of business (unless objectively justifiable)

• agree to share geographic markets, categories of client or market sectors

• agree with competitors jointly to refuse to deal with a particular client

• discuss with competitors current or prospective tenders or contracts

• warn a competitor or new market entrant to stay off your patch

• have discussions or make plans with competitors to keep new arrivals out of the market

• provide services below cost to drive competitors out of the market.


Think carefully about…

• attending or joining trade associations unless they take competition law issues seriously

• entering into agreements that involve an exclusive territory or customer group

• whether any information shared with competitors is objectively justifiable. • discuss with competitors proposed changes in the law


Do…

• make independent decisions about dealing with particular clients based on justified concerns, eg creditworthiness

• obtain information on competitors and their pricing from publicly available sources, such as the media or from customers.


Good practice…

• leave a meeting or end a conversation immediately if a competitor starts to talk about agreeing pricing, etc

• keep good records of meetings with clients and competitors and sources of information (remember that they could be made public )

• watch your language (eg inferring special deals for particular clients or asking clients to destroy a document after reading)

• have a good document retention and destruction policy, and adhere to it

• implement a written policy for dealing with competition laws, educate and train your staff, implement a ‘clearance’ or checking system for potentially anti-competitive practices, and monitor and audit behaviour and documents.