The exchange of competitively sensitive information at a single meeting can infringe competition law

15 November 2017

Author: Kerry Teahan
Practice Area: Corporate - M&A, Procurement Law

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Balmoral Tanks v Competition and Markets Authority [2017] CAT 23

Background…

On 11th July 2012 at the Best Western Hotel in Tamworth, an information exchange took place between three men, all of whom represented suppliers of cylindrical galvanised steel tanks used in fire suppression sprinkler systems. Two of the men represented long standing suppliers, Franklin Hodge and Kondea, the other represented Balmoral who entered the market six months previous to the meeting. The information exchange was secretly recorded by the Competition and Markets Authority (the “CMA”). The meeting was in relation to current and future pricing intentions and it included a discussion of target price ranges for certain sizes of tank.

Balmoral was fined £130,000 for simply discussing prices rather than actually agreeing to anything. Balmoral argued that their main reason for attending the meeting was to explain that they did not want to be involved however the CMA took the view that the information which had been exchanged was enough to infringe EU/UK competition law.

The judgment for this case highlights that even at a single meeting, exchanging competitively sensitive information can infringe EU/UK competition law exposing companies to fines and reputational damage. Balmoral appealed the CMA’s decision.

What was discussed?

The meeting began with a general discussion about the market however the discussion soon turned to the issue of pricing. Balmoral’s representative gave an indication of the prices which it had recently bid for a specific type of tank, between £15,000 and £17,000. Balmoral also disclosed the current prices at which it was selling certain tanks.

The appeal…

Balmoral held the position that they did not infringe EU/UK competition law during the meeting of 11th July. They argued that they did not have the intention to exchange sensitive information, nor could their conduct at this meeting have had any anti-competitive effect. The Competition Appeal Tribunal (the “CAT”) disagreed with Balmoral on a number of issues;

1. Disclosure of competitors pricing – Balmoral put forward the point that it is in fact common practice for customers to disclose competing bids to their suppliers in order to try and make a better deal for themselves. The CAT rejected this point and noted that the meeting provided a valuable opportunity for participants to have those understandings confirmed directly by their competitors, even if they could obtain comparable information from customers.

2. Motive – The CAT held that Balmoral’s motive for attending the meeting was irrelevant and the issue at hand was whether or not competitively sensitive information had been exchanged.

3. Exchanged Information – The CAT noted that sensitive information was exchanged and Balmoral remained at the meeting to discuss prices despite previously having said they did not want to join the main cartel.

4. Accuracy of the information – Balmoral maintained that the information which they had provided was not specific however the CAT claimed that the information was sufficiently precise to be useful to the participants.

5. Continuing to compete – Balmoral explained that it had continued to compete aggressively on price following the meeting however the CAT held that this did not relieve Balmoral of liability.

Has this happened before?

This was not the first time a business was penalised under EU/UK competition law for sharing competitively sensitive information. In 2010, the Royal Bank of Scotland was fined £28 million for disclosing pricing information about loans to Barclays. Also, in 2011, Proctor & Gamble received fines totalling €315 million for a cartel relating to washing detergents which included the exchange of sensitive pricing information as well as collusion on pricing and promotional activities.

What this should teach businesses?

Balmoral Tanks v CMA should remind businesses that they should;

  • Take steps to strictly control the flow of confidential information outside the company;
  • Exercise great care when attending meetings with competitors or events at which competitors will be present;
  • Establish clear justifications and parameters for holding/attending such meetings; and
  • Keep participation under review to ensure that such meetings do not go beyond legitimate purposes.

For further information on competition compliance please contract Kerry Teahan or Richard Gray.

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