Agreements between businesses that prevent, restrict or distort competition and which may affect trade in the UK or a part of it are not allowed.
This includes agreements that:
- fix prices for goods or services
- limit production
- divide up markets and allocate customers
The law also covers decisions by associations of businesses. The law applies to both formal and informal agreements. A shared understanding or 'gentleman's agreement' may be enough. The law also covers 'concerted practices'. This describes forms of cooperation between businesses that fall short of an agreement or decision.
Price fixing and market sharing
Competition law prohibits almost any attempt by competitors to fix prices with competitors. You must not:
- agree prices with your competitors - eg you can't agree to work from a shared minimum price list
- share markets and divide up customers or limit production - eg if two contracts are put out to tender, you can't agree that you'll bid for one and let your competitor bid for the other
- agree with your competitors what purchase price you will offer your suppliers
If you supply goods for resale, for example to a wholesaler, distributor or shop, the law will prevent you from agreeing with the reseller a minimum price at which those goods may be resold.
The law doesn't just cover formal agreements. It can also apply to other activities such as 'gentleman's agreements' and even informal discussions where confidential commercially sensitive information is disclosed. For example, you shouldn't discuss your pricing plans with your competitors.
Competition law doesn’t ban all agreements that restrict business behaviour. This will depend on how likely it is for the agreement to affect competition on the market. In particular, agreements between businesses with small market shares are unlikely to be banned (except business cartels). There are very few circumstances, if any, where a price-fixing or market-sharing agreement would be allowed.
The Competition and Markets Authority has produced videos on practices that can be anti-competitive, including this one on price-fixing.