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The U.K. Office of Fair Trading has issued a decision that the Royal Bank of Scotland and Barclays participated in anti-competitive practices relating to loan products provided to professional services firms, imposing a fine of £28.59 against RBS (see: OFT Issues Decision in Loan Pricing Case).

In announcing the decision, the OFT said:

“This brings the OFT’s investigation to a conclusion. The fine was the subject of an earlier agreement between the OFT and RBS, under which RBS admitted to certain breaches of competition law between October 2007 and February or March 2008 and agreed to co-operate with the OFT.  Barclays brought the matter to the OFT’s attention and, under the OFT’s leniency policy, has not been fined.

The OFT has concluded that between October 2007 and February or March 2008 individuals in RBS’s Professional Practices Coverage Team disclosed generic as well as specific confidential and commercially sensitive future pricing information to their counterparts at Barclays. The disclosures by RBS took place through a number of contacts on the fringes of social, client or industry events or through telephone conversations.”

The OFT’s Senior Director of Cartels and Criminal Enforcement also said:

“The disclosure of confidential future pricing information to competitors is unlawful. This decision sends out a strong message that such practices, even where they arise in the context of informal contacts between competitors, can result in substantial penalties for the companies involved. It is therefore important that companies take steps to ensure an effective compliance culture that is understood by individuals throughout their organization.”

Like Canada, the U.K. Competition Act 1998 prohibits certain types of agreements that may have a damaging effect on competition (in Canada, some types of agreements between competitors, including price-fixing and market allocation/division agreements, are “per se” illegal without any requirement to show any anti-competitive effects, while others are potentially subject to civil review where they prevent or lessen competition substantially in a relevant market).

Unlike Canada, however, where an agreement or arrangement must be proven, U.K. and EU competition rules prohibit not only certain types of anti-competitive agreements, but also certain “concerted practices” that have the object or effect of preventing, restricting or distorting competition, which can include the exchange of pricing information between competitors.

As such, the potential risk associated with the exchange of competitively sensitive information between competitors, including through third parties such as customers or suppliers, is considered to be higher in the U.K. and Europe than in Canada (though is still considered to be a high risk area under both Canadian and American competition/antitrust law).  In this regard, courts and competition/antitrust enforcement agencies are inherently suspicious when direct competitors exchange commercially sensitive information or engage in discussions regarding confidential aspects of their businesses.

Some of the types of competitively sensitive information that can raise issues when exchanged among direct competitors, without adequate precautions, include information relating to individual pricing (e.g., current or future pricing, pricing formulas and discounts), costs, sales and terms of sale, territories, markets, market shares, capacity and production data, output, customers and business and strategic plans.

The principal risk of exchanges of competitively sensitive information between competitors is that they can lead to agreements that violate the criminal conspiracy provisions under section 45 of the Competition Act.  In addition, even where an express agreement does not exist, such exchanges can allow the federal Competition Bureau or a court to more easily infer the existence of an agreement.  For example, in its recently issued Competitor Collaboration Guidelines, the Competition Bureau has highlighted the potential risk that an information exchange between competitors can lead to the inference of an agreement that contravenes the Competition Act.

Common precautions taken in the context of legitimate information gathering exercises, such as trade association research or benchmarking exercises, include aggregating the information collected (so that individual competitors are not identified), restricting information to historical information and using independent third parties to collect and distribute research or benchmarking results to reduce the likelihood of actual or tacit coordination among competitors.

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