Competition investigation: supply of bathroom fittings

Written on 18 Sep 2014

At the end of August, the UK’s Competition and Markets Authority (“CMA”), which is responsible for investigating potential anti-competitive behaviour, launched a preliminary investigation into the supply of bathroom fittings. The CMA will look at whether there appears to be evidence of cartel activity which would breach UK or EU law.

The first stage of the CMA’s investigation will be to request information from companies in the sector and to consider whether there is a case to be answered. By December 2014, the CMA will decide whether to proceed with a full investigation.

The CMA has not announced which companies are being investigated, although it is understood that Wabco and Hansgrohe have confirmed they are not under investigation.

This is not the first time the sector has been investigated. In 2010, the European Commission fined 17 companies a total of €622m for anti-competitive behaviour, while in May this year, the Swiss competition authority announced a consultation on plans to fine Swiss wholesalers in the industry 283 million Swiss francs.

What this means for builders?

The CMA investigation is at a very early stage, and it may not proceed to a full enquiry, let alone an adverse finding. At this stage there is no public consultation, although the CMA may ask particular companies for information.

If the investigation does proceed, and the CMA finds there has been anti-competitive behaviour, it can levy significant fines. In addition to these statutory fines, companies and individuals who have been harmed by the anti-competitive behaviour, for example by having to pay higher prices for products, can claim compensation from the companies found liable. These are known as “follow-on claims”.

In follow-on claims, companies who believe they have suffered damage have to prove their loss, but they can rely on the CMA finding as proof of the illegal behaviour, so claims are (relatively) easier to bring. (In fact, any company can bring a claim for damages for breach of competition law at any time, but it then has the burden of proving the illegal activity.) Losses, such as over-paying because of illegal behaviour, may well have accumulated over a long period of time and so it’s worth considering whether your business may have been affected. If so, protect your position by ensuring that you preserve relevant documents.