Competition Law: Why It's More Complex Than You Might Think

When people think of competition law breaches, they often imagine clandestine midnight meetings, secret handshakes, and brazen agreements between competitors to carve up markets or fix prices. While these classic cartel activities certainly grab headlines, not all competition law issues are so obvious. In fact, many competition law restrictions are far more subtle and can easily catch businesses off guard.

As contract lawyers, we are well-versed in spotting competition law concerns hidden within the fine print of agreements. A common example arises in distribution agreements: suppliers may try to set resale prices for distributors (known as resale price maintenance) or allocate customers and territories between them. While these restrictions might seem like smart commercial strategies, they can trigger serious competition law risks.

The challenge is that competition law is notoriously complex. Certain provisions that, on the surface, appear anti-competitive can sometimes be permissible, but only if very specific conditions are met. There is a delicate balancing act at play, and what is lawful in one context could be unlawful in another.

The consequences of getting it wrong are significant. Infringements of competition law can lead to extremely hefty fines — up to 10% of a company's worldwide turnover. Much like the impact of fines under data protection laws, this "global turnover" basis for calculation makes the penalties potentially devastating, especially for multinational companies.

Another key area that demands attention is the distinction between agency and distribution systems. This distinction isn't just a technicality; it fundamentally impacts how competition law applies. True agents, who sell goods on behalf of a principal without taking ownership of the goods, are generally exempt from certain competition law restrictions. Distributors, on the other hand, who buy and sell products in their own name, are subject to much stricter rules.

In short, competition law is a legal minefield, and assumptions can be dangerous. It's vital to approach contract drafting with a sharp eye on competition law implications, seek expert advice where needed, and never assume that "standard practice" is necessarily safe.

If you'd like to know more about how we can help you navigate these tricky areas, feel free to get in touch! Contact Tracey at 01202 729 444 or email tracey@law-point.co.uk.