SMEs need purchasers' help on competition law

8 June 2005
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09 June 2005 | Liam O'Brien

Purchasers should ensure their small and medium-sized suppliers (SMEs) are fully aware of what constitutes anti-competitive behaviour, according to the Office of Fair Trading.

Legal experts fear that failing to do so may lead to buyers unwittingly colluding with suppliers that manipulate markets and breaking the law themselves.

The call followed research from the OFT showing only 49 per cent of firms with 10-19 employees are aware of the requirements of the Competition Act 1998. This compares with 80 per cent of business employing more than 200 staff.

It fears a high level of ignorance of the law among smaller companies means they risk inadvertently colluding with rivals in price-fixing and bid-rigging and landing themselves in court.

The competition watchdog believes purchasers could do more to inform SMEs about the legal framework within which smaller businesses have to operate.

An OFT spokesman told SM: "It is important that purchasers make SMEs aware of their rights and responsibilities under competition law so they can take the best advantage from competitive markets."

A lawyer explained ignorance of the law by buyers was no defence against prosecution under either the Competition Act 1998 and the Enterprise Act 2002.

Matt Woodford, associate at law firm Eversheds, said: "There are many ways that agreements between buyers and suppliers can fall of these laws."

Selling on a product or service obtained from a supplier to a customer at a price set by the supplier was one example, he said.

Colin McNeil, chair of the CIPS construction procurement group and director of procurement at Kier Northern, said making suppliers aware of their obligations under competition legislation should be a priority for procurement professionals.

"Purchasers have to make sure all their suppliers know the rules of engagement. The purchaser holds the documents and is aware of the Competition Act requirements."

An OFT campaign to highlight the issue, Championing Competition, is intended to show SMEs how to avoid anti-competitive behaviour.

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