Price fixing is an unlawful practice that occurs when a number of companies that would normally be expected to compete against each other conspire to artificially set market prices at a specific rate. This could mean raising, lowering or freezing prices at a specific point, or coming to some other agreement undermining anti-competition laws.

This practice is illegal because it is considered to be anti-competitive and anti-consumer, making it hard for other companies to enter the market and usually leads to higher prices for customers.

When businesses conspire to illegally subvert competition laws and the natural functioning of the market, this is known as a cartel.

These illegal activities include a range of potential offences beyond price fixing, such as the sharing and distribution of commercially sensitive information, or creating a verbal “gentleman’s agreement” to slice up and share out a market between them.

These practices are considered to undermine laws that are in place to protect consumer choice and market competitiveness.

If a company and its directors are found guilty of price fixing or setting up a business cartel, the organisation could face the following consequences:

• A fine of up to 10% of the company’s total turnover
• Seizure of assets
• Paying all of the legal costs associated with the case

Additionally, the individuals responsible may face a number of penalties, including:

• A prison sentence of up to five years
• Disqualification from being a company director for up to 15 years

These are the penalties for cartels and price-fixing activities under UK law, but if the case has an international element, those found guilty might face penalties based on the laws of other jurisdictions.

Price-fixing falls under competition law in the UK and is generally considered a violation of the Competition Act 1998. This kind of anti-competitive behaviour can lead to severe penalties for both the businesses and individuals involved. These penalties depend on a number of factors that are unique to each case and could include:

Scope of the offence

The length of time over which the price fixing occurred can significantly impact the penalty, with longer durations typically resulting in higher fines. If the firms involved had a comprehensive, complex system for price-fixing (compared to a more informal arrangement), this could also be a factor.

Companies or individuals that have made substantial financial gains from the illegal activity are more likely to face higher fines. As such, the financial gains resulting from an offence will help to determine the nature of the punishment.

If the price fixing had an international component, penalties might be influenced by laws and regulations of multiple jurisdictions. Some countries have more severe punishments for cartel activities than others.

Level of involvement

Firms or individuals who were the instigators of the price-fixing may receive harsher penalties compared to those who were merely participants. Companies that have been suspected or found guilty of price-fixing or other anti-competitive practices in the past are also likely to face steeper penalties.

Market impact

Companies with larger market shares may face more severe penalties as their actions have a more significant impact on consumers and the market. The extent to which the price fixing has caused consumer harm, such as higher prices or reduced choices, will also be a factor in determining penalties.

While these factors may all cause a business or individual to incur more serious penalties, there are also factors that can mitigate the sentence a guilty party will receive.

Cooperation

Companies or individuals who cooperate with the Competition and Markets Authority (CMA) or the European Commission (for cases involving the European Union) might receive reduced penalties as a result. This may be offered at the discretion of the relevant authorities, but it is not a guarantee in price-fixing cases.

Corporate policies

The presence of a robust compliance system within a company can affect the penalties it will receive for involvement in a scheme to fix prices. If the business has an effective internal system to prevent price fixing that limited the impact of the price-fixing activity, this could mitigate fines. If you want to develop a policy like this for your business, contact a legal representative who can advise you on the elements of compliance you need to consider.

Legal advice

Finally, working with an expert solicitor and securing a high standard of legal representation can help to mitigate or avoid penalties. A price-fixing, cartels and competition authorities solicitor can challenge evidence, explain your case and make sure you are treated fairly at all stages of the investigation process. This is a complex area of law, and you will require a solicitor with significant expertise in this area. The team at JMW has a wealth of experience with price-fixing and cartel cases and can ensure you receive only the most practical, effective legal guidance.