Legal Lingo: Cartel Talk - When a Coffee Could Become a Case

Being an aspiring commercial lawyer often means being confronted by complex, often abstract, concepts leading to an often impenetrable wall of jargon for students and trainees. Next up in our Legal Lingo series, which we've introduced to help break down this jargon, is an explanation of cartels from a competition law perspective.

A cartel – for the purpose of competition law – is an arrangement or association between two or more competitors aimed at limiting or reducing competition.  Whilst there is no universal definition, there are common understandings of what they entail.

Cartels are typically horizontal (between competitors at the same level of the supply chain).  Cartel conduct can include:

• Information exchange: sharing commercially sensitive information about prices, customers and sales.
• Bid rigging: colluding on tenders to decide who bids on a tender (and the bid quotation).
• Wage fixing: fixing rates of pay or salaries.
• Price fixing: agreeing predetermined prices, discounts or even credit terms on an agreement.
• Market sharing: dividing up geographical territories, customers or suppliers.
• Output restrictions: limiting production of goods or services to increase prices.

Cartel behaviour harms customers and businesses, depriving them and the wider market of the benefits of fair competition.  It is no surprise that both the UK’s Competition Market Authority and the European Commission have identified cartels as some of the most serious infringements of competition law. 

Importantly, collusive conduct under Article 101(1) of the Treaty on the Functioning of the European Union (TFEU) and/or Chapter I prohibition of the UK’s Competition Act 1998 does not need to be evidenced by a written agreement.  A simple handshake arrangement, or an exchange of competitively sensitive information over coffee or dinner can be sufficient to establish liability.

If cartel activity is established, there are corporate fines, director disqualification and, in the UK, even criminal sanctions for individuals. No such criminal sanctions exist under the TFEU, but it is clear that sanctions are severe. 

It is essential that companies implement competition law compliance programmes, provide antitrust training to employees and establish clear, internal protocols for reporting any conduct that could give rise to cartel or other anti-competitive conduct. By fostering a culture of compliance and due process, companies can mitigate the risk of involuntary involvement in cartel conduct… and the significant commercial and legal consequences that might follow.

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