Competition law

1. Competition law Levelling the field

2. Learning objectives • Why competition law? • What are anti-competitive agreements? • Avoiding anti-competitive practices and market abuse • Our company’s anti-trust policy • Your responsibilities

3. Why competition law? “Competition encourages businesses to improve and innovate, for the benefit of their customers. Competition law makes sure businesses are competing on a level playing field and are protected from others acting unfairly…” - Competition and Markets Authority

4. Why is competition important? Our bid was irrelevant. They’d already agreed who would win the contract before we entered the race. We were forced to sell goods at a set price. When we tried to cut prices, they said they’d stop supplying us. Customers lost out. Retailers had fixed prices in advance. There was no way we could compete on those terms They carved up the territory between them.

5. Anti-competitive agreements • Horizontal • Vertical

6. 4 types of cartels: • Price fixing • Market sharing • Output restriction • Bid rigging

7. When it goes wrong Banks fined €1.71bn for forming cartels Pharma company Servier and 5 others fined €428m for collusion Microsoft fined £484m over IE browser bundling Proctor & Gamble and Unilever fined £281m for price-fixing Bathroom supplier fined £826k for Resale Price Maintenance Golf equipment firm Ping warned over ban on online sales

8. Vertical agreements • Agreements between parties that occupy different links in the supply chain: • Distribution, manufacturing and supply, etc • Franchising is allowed under competition law

9. Online sales • Online selling supports market integration • Suppliers and manufacturers must not charge retailers higher prices for products sold online, without good reason • Some exceptions – e.g. higher warranty claims

10. You make the call: Is it allowed or not? “Can you stop selling to customers outside your territory?” “Can you improve your website? It looks bad for our brand” “Can you limit the volume of products you sell online?” Allowed Not Allowed Allowed Not Allowed Allowed Not Allowed   

11. Retail price maintenance When we wanted to lower our prices, we were told it’d breach our agreement. They said they’d stop us selling their goods. There were restrictions on how much discount I could give. I wasn’t allowed to undercut other retailers.

12. You make the call: Is it a violation or not? “Prices were fixed by the parent company right across the group” “If you keep selling products at this low price, we’ll review our agreement” “Can you stop other retailers undercutting us?”   Violation No violation Violation No violation Violation No violation 

13. Abuse of dominant position • A dominant company is one that enjoys the freedom of set prices and production volumes without competitive pressures. Dominance in itself is not anti-competitive. However, if the conduct of the dominant company results in artificially high prices or significantly reduced choices for consumers, it can attract regulatory action.

14. What is a dominant position? Our company has a large market share (eg 35-40% or more) Our market share is much lower than most of our competitors We have significant financial power or a technological edge compared to our rivals YES YES NO We own patents which prevent others competing in the market Regulatory, legal or other barriers prevent competition We are fully integrated upstream and downstream so can shut out competitors YES YES YES

15. You make the call: Is it a dominant position or not? “We own over 60% of the rail network across Europe” “It’s hard for new firms to enter our sector due to patents owned by the major players” “We mine 40% of diamonds sold worldwide and limit production to avoid oversupply”    Yes No Yes No Yes No

16. Examples of abusive conduct: • Price gouging or charging extortionate prices in the absence of competition • Limiting production to create scarcity or exclusivity to drive up prices • Refusal to supply a long-standing customer without good reason • Charging different prices to different customers for identical goods and services • Forcing customers to buy related products or sign up to service contracts as a condition of purchase

17. Tying and bundling Tying Requiring the purchaser of a product to buy another product or service Bundling Selling two or more products together as a package Mixed Bundling Selling products that can be bought separately together at a discount

18. Busting myths “We’ve earned this position – others are free to challenge us” No. Dominant players often force out smaller players, making it impossible for them to compete on the same terms Yes and no. Being in a dominant position isn’t wrong. But, if prices are higher and customers have less choice, it will attract scrutiny “Surely it’s good to have dominant leaders? It provides consistency” No. But, you must not insist they’re used or pressure retailers to stick to them “Does it mean we can’t use recommended retail prices at all?”

19. Scenario 1: At the trade event What should she do? Remove herself from the conversation immediately Listen in discreetly – she could get some useful market intelligence Inform Compliance when she returns to the office  All our main competitors were there. They suddenly started discussing prices and discounting. 

20. Penalties • An order to stop the anti-competitive agreement or conduct • Fines of up to 10% of worldwide turnover for offending companies • Fines and up to five years' imprisonment for individuals involved • Disqualification of company directors for up to 15 years

21. Our Anti-trust Policy • Providing information and training – raising awareness • Setting the tone from the top – encouraging fair competition and a level playing field for all • Explaining our systems and controls • Prohibiting anti-competitive practices in all our agreements and contracts • Requiring everyone to read and implement our Anti-trust Policy, promoting fair competition

22. DO • Read our Company's Anti-trust Policy – make sure you understand our rules and know what to do • Immediately remove yourself from any conversation which may be perceived as anti-competitive and have your objection minuted • Be vigilant and watch out for indicators of anti-competitive behaviour or practices • Report any incident that could be deemed anti-competitive as soon as possible to Legal or Compliance

23. DON’T • Enter into agreements with competitors regarding prices, margins, market share or production volumes • Place price, territorial or online sales restrictions on suppliers or distributors – if you need to do this, get advice from Legal first • Act in a way that restricts competition in any market where we have a dominant position • Discuss pricing plans or promotions with competitors or suppliers, or RRPs with retailers • Say anything that could constitute an anti-competitive agreement or give the perception of this

24. Any Questions?

25. Reporting anti-competitive practices • Use the online reporting form to report anti-competitive practices to the Competition and Markets Authority • Call the Cartels Hotline on 020 3738 6888

26. Next steps • Call _____ on _____ if you need information or guidance • Call _____ on _____ if you need to raise concerns • Access self-study courses on our e-learning portal for further training [or optionally – Complete your mandatory training on our corporate e-learning portal]