“Is the cleaning services sector lacking a competitive edge?” Alleged anti-competitive agreements in the industry may be an infringement of the Competition Act

First published by Author on November 17, 2016 in the following categories: Latest and tagged with cma

The cleaning services sector is the next sector to receive the limelight and an investigation from the UK’s Competition Markets Authority (CMA).

In March this year, the CMA launched an investigation into alleged agreements following allegations that the sector were involved in anti-competitive arrangements, which claimed an infringement on the Competition Act 1998.

These are very serious allegations.

Is there any truth to this?

The allegations remain as allegations, as the CMA have not gathered enough information and evidence to claim that there has been a definite infringement of competition law.

The Competition Act, in particular section 2 (dubbed the ‘Chapter I prohibition’), provides that companies and organisations should be prohibited from making agreements that may prevent, restrict, or distort competition. In effect, this is so that trading in the UK can be open and fair, and allow smaller businesses to be able to compete with the bigger organisations.

All this ensures there is a real and fair choice for consumers.

Is it hard to maintain a competitive edge?

The alleged anti-competitive agreements between the cleaning businesses could include cartel agreements, with accusations that prices are fixed, or that sharing information about prices and market-sensitive information has taken place between competitors. It can be fairly easy to fall into these kinds of agreements innocently and unknowingly, but there is never an excuse for businesses to do this as this kind of thing as it can adversely affect markets and consumers.

CMA’s responsibility

The Enterprise and Regulatory Reform Act 2013 established the CMA as the UK’s economy-wide ‘watchdog’ who are tasked with ensuring that competition stays fair, and that markets benefit consumers. At the end of the day, they are looking to see whether there is fair competition and that it would provide consumers with a wide-range of choice, allowing them to make their own fully informed choices.

In order to protect consumers, the CMA launches investigations and market studies into anything that could be deemed to adversely affect competition. If there is a competition problem, the CMA can enforce remedies. Therefore, if the cleaning services sector are found to lack competition, the CMA can legally enforce remedies against them which businesses and organisations must follow. This was shown in the recent investigation into the energy markets, where the CMA enforced remedies in favour of consumers, and is aimed at creating and maintaining fairly competitive markets.

Fines can also be imposed on businesses and organisations which can amount to millions of pounds.

The ‘next phase’

In the next couple of months, the CMA will investigate these issues further, which may include further information requests and reviewing businesses that are subject to the investigations. By the end of November/December, the CMA are expected to make a decision on the next ‘phase’ of their operation.

Options of the next phase could include investigating all of the information thus far and creating further action plans, or, if they believe they have sufficient evidence, they could draw the case to a close by implementing remedies as they see fit. This can all depend on whether they believe the cleaning services industry have infringed competition laws or not.

We’ll keep an eye on this one.