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CMA launches campaign targeting cartel behaviour

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  • 19/02/2018
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CMA launches campaign targeting cartel behaviour
The Competition and Markets Authority (CMA) has launched a campaign to target businesses colluding to stifle competition and keep prices high.

The campaign will target a range of industries at greater risk of anti-competitive behaviour, including construction, manufacturing and business support services – such as in the case of the Somerset estate agents who were fined over £370,000 for fixing the minimum prices of their commission rates.

A cartel is defined as an association of manufacturers or suppliers with the purpose of maintaining prices at a high level and restricting competition.

The latest anti-collusion campaign will encourage consumers to report suspicions of cartel activity, and follows a previous campaign targeting cartel behaviour which contributed to a 30% increase in tip offs throughout 2017.

For would-be whistleblowers who are involved in the cartels, the CMA is offering incentives to come forward with information, such as a reward of up to £100,000, “significant reductions” in fines, and avoiding disqualification.

The CMA added that the first informant to come forward can also receive total immunity, including from criminal prosecution.

Over the past two years, the CMA has issued £151m in fines following investigations into anti-competitive practices, and it is currently investigating 15 cases where competition law may have been broken.

Stephen Blake, senior director for cartels at the CMA, commented: “We are committed to tackling cartels wherever we find them. More people are reporting illegal activity to us and we urge anyone with information to come forward. If you’re involved, it’s better to be safe, not sorry and to tell us about it first – before someone else does.”

“All information is treated confidentially and we can discuss any concerns that people may have over keeping their identity secret,” Blake added.

Blurry lines

Commenting on the CMA campaign, Arron Bardoe, director at Temple Capital Finance said: “I’m not aware that cartels are currently rife in the industry, but the CMA could potentially look at estate agents’ and developers’ relationships with in-house brokers and legal services.”

Bardoe continued: “The main view with estate agents is that they are acting for a vendor, so should not be offering advice services for buyers because that creates a conflict of interest.

“[The relationships] are where I see the risk of inappropriate behaviour, such as solicitors who might not disclose information on leasehold rents properly.”

He added: “It’s a good idea. Consumers should have advice that’s fully independent of the parties acting for the vendor.”

Improbable

David Hollingworth, associate director communications at London and Country, said that while some areas in the broker space may be looked at by the CMA, the current levels of competition and product variation means that such collusion is improbable.

“The products available to brokers are manufactured by the lender, so in terms of influence on pricing there is no possible way for brokers to affect that,” commented Hollingworth.

“I suppose where there have been issues in the past is around the line between estate agents and in-house financial services,” he suggested.

“But any collusion around the core activity of finding the best fit and cheapest rate for the client is unlikely,” Hollingworth added, “In terms of the market itself, it is very competitive.”

Meanwhile, the CMA crackdown announcement comes as the Financial Conduct Authority (FCA) is due to deliver a delayed interim report on competition in the mortgage sector.

The FCA market study aims to ask whether available tools help mortgage consumers make effective decisions, and whether commercial arrangements between lenders, brokers and other plays lead to “conflicts of interest or misaligned incentives to the detriment of consumers”.

An interim report was due to be published in Summer last year, but the FCA has opted to defer the release until Spring this year, with a final report due later in Q4 2018.

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