Anti-Competitive Practice: A warning to Isle of Man businesses

Recent media coverage has highlighted the UK Office of Fair Trading’s announcement that British Airways are to pay a record £121.5m penalty following a price fixing investigation.

British Airways has admitted that between August 2004 and January 2006, it colluded with Virgin Atlantic over fuel surcharges. Over that period, the surcharges rose from £5 to £60 per ticket for a typical BA or Virgin Atlantic long-haul return flight. Virgin Atlantic is not expected to pay any penalty as it qualifies in principle for full immunity under the UK OFT's leniency policy.

The Isle of Man Office of Fair Trading would like to take this opportunity to remind all business in the Island that the Fair Trading Act 1996 allows the Office to investigate suspected incidences of anti-competitive practice and report its findings to the Council of Ministers. The Act defines anti-competitive practice as a course of conduct which has the effect of “…restricting, distorting or preventing competition in connection with the production, supply or acquisition of goods in the Island or the supply or securing of services in the Island.”

Agreements between businesses to do any of the following, could be considered as anti-competitive practice:-

• fix the prices to be charged for goods or services
• limit production
• agree market share
• discriminate between customers (eg, charge different prices or impose different terms where there is no difference in what is being supplied)

The Isle of Man Office of Fair Trading is keen to hear from the public or businesses in relation to anti-competitive practice. If you suspect that a competitor, supplier, customer or any other business is behaving in such a manner please contact the Office.

There are a number of possible tell-tale signs that may indicate a business behaving in an anti-competitive manner. These include:-

• an existing long standing major supplier suddenly decides, for no apparent reason, to stop supplying you with a product
• you receive quotations from various suppliers that are surprisingly and unusually similar
• a major supplier refuses to sell you the product you want unless you also buy a separate and unconnected product
• you approach a number of competing suppliers and find that only one is willing to supply the goods you want in your area
• a supplier prevents you from selling their products at a discount

Chief Officer of the Isle of Man Office of Fair Trading, Nick Black, said “Competition is important in all marketplaces, including the Isle of Man. Open and fair competition between traders is good for consumers because it promotes lower prices, improved product quality and increased choice. The Isle of Man Office of Fair Trading remains committed to protecting the interests of the Manx consumer by ensuring that markets on the Island are free from anti-competitive practice.”

Notes

1. The fact that a business is behaving in any of the above ways does not necessarily mean it has breached the law. In some cases the behaviour in question may be a perfectly legitimate response to strong competition in the market.

2. Listed below are some additional examples of types of agreement that might be considered anti-competitive. Further information is available on our website www.gov.im/oft. Whether such agreements are anti-competitive is highly dependent on many other circumstances which would have to be determined by the Office or any subsequent Commission and therefore should not be regarded as automatically anti-competitive or prohibited. Businesses considering entering into such agreements may wish to seek legal advice in the first instance.

• Exclusive supply dealing arrangements - A supplier agrees to supply only one customer, usually in a certain geographical area. The customer in turn agrees not to stock or handle products of the supplier’s competitors and perhaps not to compete with other customers of his supplier.

• Exclusive purchasing contracts - A customer agrees to buy his requirements exclusively from a single supplier. Contracts which do not specify exclusivity but require the customer to buy a specified proportion of his requirements or even a specified quantity in a period may also have anti-competitive effects.

• Restrictive terms - These occur in contracts which prevent or restrict the customer from dealing with the suppliers competitors.

• Selective distribution systems - A supplier will deal with only a certain number of distributors or only those which can satisfy criteria he lays down on such matters as stock holding levels or pre- or post-sales service.

• Tie-ins - A tie-in exists when the supplier of one product or service (the tying item) insists that the customer must buy all or part of his requirements of some other product or service (the tied item) from the supplier or someone nominated by him.

• Restrictions on the supply of parts or other inputs required by competitors - A practice which can prevent or restrict competition can occur if vertically integrated firms refuse to supply items needed by competitors who are not engaged in the complete production process or may supply them only at prices which make it difficult for the competitor to sell the end product at a competitive price.