When there's a competition compliance risk, it is definitely better to go.
You know better than to start talking about prices or customers with your competitors. But if the conversation goes off the rails, what do you do?
In July 2012, Allan Joyce, managing director of Balmoral Tanks, walked into the Best Western Hotel in Tamworth, UK. He had a shrewd suspicion as to why two of his major steel tank rivals had invited him there. Balmoral was a new entrant, pricing aggressively. His rivals explained there was a better way.
"[T]he conclusion we came to last time we had this conversation between ourselves was that we ended up divvying up the customers, gold and silver customers." In short, cartelising was better than competing. And Balmoral should join the club.
Mr. Joyce was not the only one with suspicions. Though he did not know it, for months now the authorities had been covertly videotaping the meetings of the cartel. Every word Mr. Joyce now uttered would be caught on tape
"I wanted to make sure they saw Balmoral as a credible competitor and I didn’t want to kill off all legitimate contact with them."
Mr. Joyce knew the cartel was straight out illegal. He would never join. But, he explained: "I wanted to make sure they saw Balmoral as a credible competitor and I didn’t want to kill off all legitimate contact with them." So he stayed for an hour, discussing the market:
- "Reading between the lines, there will be a low price, maybe a proper market price on the 135, anything below £15,000 is stupid […] It's bonkers."
- "We've just got to make sure we're talking about our share at the right price."
- "We can always pick the phone up and have chat about it see where we are, make it quite clear where the bands are, if you go outside that band, on the low side then I'd like to think it won't be driven by us."
- "If it's falling out of the bands, that's the concern."
Mr. Joyce flatly refused to join the cartel, and did not think he was sharing anything new or sensitive - "otherwise I would not have done it." But he didn't feel he could just walk out of the competitor meeting:
- "I cannot just walk in there and almost put up my finger and walk out the door, because I am going to meet those guys in the market place, at trade association meetings or exhibitions".
- "I am actually quite a professional guy, I do have some manners."
The authorities found that attending that one meeting, even though Mr. Joyce refused to join the wider cartel, was enough to earn Balmoral a fine of £130,000.
So was this a problem? Yes. The authorities found that attending that one meeting, even though Mr. Joyce refused to join the wider cartel, was enough to earn Balmoral a fine of £130,000. Upholding the fine, the court was unequivocal about "the need to send a clear signal to other undertakings of the dangers of casual discussions about price." Quite a price tag for being polite. For staying at the meeting. For not walking out immediately.
The main cartel between four galvanised steel tank suppliers ran between 2005 and 2012, dividing customers between the players, fixing prices of tanks and rigging bids for contracts. It started in the margins of legitimate meetings to discuss industry standards when, according to Nigel Snee from Franklin Hodge Industries Ltd., "the suggestion was made that we should stop cutting each other's throats on prices and that a sensible pricing policy for the tanks should be restored." In 2016, three companies, including Franklin Hodge, were fined more than £2.6 million after their fellow cartelist blew the whistle on them to the competition authority (thereby avoiding being fined itself). Nigel Snee was charged with the criminal cartel offence and sentenced to six months. The sentencing judge said that "the economic damage done by cartels is such that those involved must expect prison sentences."
Although Balmoral Tanks was not part of that wider cartel, and attended just one meeting with its competitors, it was fined £130,000 for exchanging sensitive pricing information during that meeting. The UK's Competition and Markets Authority said that Mr. Joyce needed to publicly distance himself from the information exchange, and to express that "firmly and unambiguously." These actions were not enough:
- Arriving late at the meeting and leaving early
- Steering the conversation to other topics
- Evasiveness and body language during the meeting
- Be antitrust aware in any contacts with competitors. Think about how it would look to a competition authority.
- Never discuss anything that could be viewed as competitively sensitive. That includes anything related to prices, pricing strategy, costs, customers, territories, sales or confidential business plans.
- If discussions raise competition concerns:
- Speak up. Voice your concern and ask that the discussion of that topic be terminated.
- If the discussion continues, leave. Leave the meeting. Immediately. If you stay, you and the company will be liable for whatever is said, even if you don't contribute.
- Record your objection and departure. Make a note for yourself and for your legal & compliance team. Ensure any minutes of the meeting reflect your departure.
- Escalate to your legal & compliance team.
Remember - if you stay, you and the company are liable for any illegal discussions that occur. Even if you tell your competitors you will not participate. Don't be polite like Mr. Joyce and pay a fine. When the question is stay or go, definitely go.