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


On 11 July 2012 Nigel Snee, Clive Dean and Allan Joyce met in a Tamworth hotel. None of the attendees realised that the meeting was being filmed and recorded by the Competition and Markets Authority ("CMA"). Mr Snee and Mr Dean were managing directors of Franklin Hodge Industries Ltd ("Franklin") and Kondea Water Supplies Ltd ("Kondea") respectively. Franklin and Kondea, together with other companies had, for several years, operated a market sharing, price fixing and bid rigging cartel in the market for galvanised steel tanks. Mr Joyce's company, Balmoral Tanks Limited ("Balmoral") was a new entrant to the market and had vigorously competed against the cartel members, successfully winning business from them and driving down prices by as much as 20%. The purpose of the meeting was for Mr Snee and Mr Dean to seek to persuade Mr Joyce of the merits of joining the cartel. Mr Joyce refused, and subsequently appeared as a witness in the CMA's successful criminal prosecution of Mr Snee, which resulted in a suspended 6 month prison sentence and 120 hours community service. So why, then, was Mr Joyce's company fined £130,000 in respect of a meeting at which he refused to join an unlawful cartel? The answer illustrates the real difficulties in identifying the line between innocuous discussion and unlawful information sharing. In this case the CMA, and the Competition Appeals Tribunal ("CAT"), concluded that the discussions that took place fell on the unlawful infringement side of that line.

The law on information sharing

Article 101 of the Treaty on the Functioning of the European Union, and section 2(1) of the Competition Act 1998 ("the Chapter I prohibition") prohibit "agreements between undertakings, decisions by associations of undertakings or concerted practices which may affect trade, and have as their object or effect the prevention, restriction or distortion of competition".

The European Courts have consistently defined the concept of a concerted practice as “a form of coordination between undertakings which, without having reached the stage where an agreement properly so-called has been concluded, knowingly substitutes practical cooperation between them for the risks of competition.”[1]

For unlawful "co-ordination" to exist there does not have to be an actual plan between undertakings. The rules "strictly preclude any direct or indirect contact between such operators, the object or effect whereof is either to influence the conduct on the market of an actual or potential competitor or to disclose to such a competitor the course of conduct which they themselves have decided to adopt or contemplate adopting on the market.”[2]

In a properly functioning market, undertakings should not know how their competitors are likely to behave. As the Court of Justice ruled in the T-Mobile case, "[i]t follows that the exchange of information between competitors is liable to be incompatible with the competition rules if it reduces or removes the degree of uncertainty as to the operation of the market in question, with the result that competition between undertakings is restricted. …”[3]

The prohibition is strictly applied. In the case of JJB Sports v Office of Fair Trading[4] the CAT held that “[t]he fact of having attended a private meeting at which prices were discussed and pricing intentions disclosed, even unilaterally, is in itself a breach of the Chapter I prohibition, which strictly precludes any direct or indirect contact between competitors having, as its object or effect, either to influence future conduct in the market or to disclose future intentions.”

The information that was shared

The CMA found that although Mr Joyce refused to take part in the cartel's allocation of customers he exchanged information regarding current and future pricing intentions with the other attendees, including after the existence of the cartel's customer allocation arrangement had been confirmed to him. The CAT judgment quotes extensively from the transcript of the meeting. Many of the statements, although often vague and non-committal, referred to pricing bands. Mr Joyce is recorded as saying:

"Better near the top of the band than the bottom of the band for sure ... Somehow that’s the area the target price."

“We can always pick the phone up and have a 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.”

After the meeting Mr Snee made three telephone calls in which he relayed information about the price bands within which Balmoral would quote for tanks supplied to schools and supermarkets.

The CMA found that as a result of the exchange of information about their current prices and future pricing intentions at the meeting, the parties reduced uncertainty as to their intended conduct on the market and substituted practical cooperation between them for the risks of competition.

Balmoral's appeal to the CAT

Balmoral appealed the CMA's infringement decision (and fine) on several grounds, all of which were unanimously dismissed. On Mr Joyce's purpose in attending the meeting the CAT found that while his initial purpose was to bring an end to illegitimate contact, his comments showed that during the meeting it was his intention that prices stabilise towards the higher end of the bands that were discussed.

The CAT had no difficulty in finding that a one-off meeting can amount to an infringement (as in the T-Mobile case). While the effect of a one-off information exchange may be limited in duration, the CAT noted that this particular market was characterised by few suppliers and few customers, but a high frequency of tenders, meaning that pricing signals can have an amplified effect in reducing uncertainty.

The CAT also agreed with the CMA's rejection of Balmoral's argument that the price band information was generic and historic. There were references in the transcript to current pricing, specific projects, and target prices.

Balmoral argued that there was already price transparency in the market (because customers would regularly disclose other bidders' prices in order to negotiate reductions) so the price bands discussed were readily accessible market data. The CAT noted that while customers may disclose competitors' prices when it suited them, the meeting provided an opportunity to understand future pricing intentions, and therefore decrease risk.

Finally, the CAT rejected Balmoral's argument that notwithstanding the information shared at the meeting it continued to price aggressively afterwards (it bid for, and won, a tender for which it submitted a price £100 lower than the applicable band that was discussed in the meeting). The Tribunal pithily concluded that:

"Even if Balmoral did in fact continue to compete aggressively for business after the meeting, this does not, in our judgment, negate Balmoral’s liability for the infringement ... [A] cartel member who disregards what is agreed for its own ends is still liable for the infringement."

Lessons to be learned

Meetings between competitors are an inevitable and necessary part of business. The line between innocuous discussion about market conditions and competition law infringement can be difficult to identify and easy to cross. Discussions about price should always be avoided. As should talk about bidding strategies and how to deal with certain customers. Active participation is not required. The CMA and CAT were in no doubt that Mr Joyce should have left the meeting, giving short shrift to his wish not to have appeared rude. If in any doubt, end the discussion and leave.

[1]           Case 48/69 ICI v Commission

[2]           Case 40/73 Suiker Unie v Commission

[3]           Case C-8/08 T-Mobile Netherlands BV v Dutch Competition Authority

[4]           [2004] CAT 17

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