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Horizontal agreements

A cartel is a collusive agreement between rival business to eliminate the process of competition, i.e. not to compete against each other to capture sales.

Agreements between competitors (collusion) to fix price, share market and restrict supply are prohibited. Such horizontal agreements usually significantly prevent, restrict or distort competition. The anti-competitive cooperation results in higher prices, lower choice and poorer quality of products and services. This is because the firms collude to eliminate the process of competition (rivalry) that should exist between them to capture sales. The elimination of competition reduces the innovative potential of the enterprises. Cartels thus hurt the consumer directly. And stifle economic growth and hamper progress.

The Competition Commission investigates and imposed substantial fines on enterprises involved in a cartel. The enforcement of the prohibition (investigation) and the decision making to impose fines is made by the Competition Commission without having recourse to Courts.

Horizontal agreement

The prohibition on horizontal agreement between competitors (actual and potential) is found in section 41 of the Competition Act 2007. It is one of the three forms of collusive agreement; the others being bid rigging and Vertical Agreement involving resale price maintenance.

Horizontal agreement is an agreement between enterprises which operate in the same market and are competitors on the market. The term agreement is defined widely under the Competition Act 2007. It can take any form, whether written, oral, or through direct or indirect communication whether or not legally enforceable. The agreement must however be meant to be implemented in Mauritius or in a part of Mauritius.

A collusive agreement therefore does not need to be in writing in order to be found in breach of the Section 41 provisions of the Act.
A horizontal agreement is collusive and prohibited if it has the object or effect of fixing price, sharing markets or restricting output.

Price fixing

There are many ways in which prices can be fixed. For example, the agreement may involve either the price itself or the components of a price such as a discount, establishing the amount or percentage by which prices are to be increased, or establishing a range outside which prices are not to move.

Price-fixing might also take the form of an agreement to restrict price competition. This may include, for example, an agreement to adhere to published price lists or not to quote a price without consulting potential competitors, or not to charge less than any other price in the market.

Market sharing

In a market-sharing cartel the members agree on how to eliminate the process of competition between themselves by sharing the market. These are agreements between competitors to refrain from supplying into each other’s (allocated) market. The customer is thus forced to buy from the enterprise chosen by the cartel.

Examples of market sharing collusion includes the allocation of customers by geographic area or territory, type or size of customer, and dividing contracts by value within an area. Other examples of market sharing include agreements between rival businesses not to compete for established customers belonging to each other or not to produce each other’s products or services or not to expand into a competitor’s market.

Restriction of supply

Agreements to restrict supply has the aim of causing an artificial shortage on the market and thus leading to an increase in price. It includes the fixing of production levels or quota so that businesses agree to reduce their production capacities i.e. they refrain from producing as much as they would have produced independently.

Agreements to limit technical development would normally be considered collusive, as would agreements to limit capacity or otherwise restrict investment.

No exception or exemption to cartel conduct

Unlike other types of restrictive business practices (abuse of monopoly situation, mergers, vertical agreements other than Resale Price maintenance) for which offsetting public benefit may be found, the Competition Act 2007 does not allow the Commission to exempt or otherwise authorize a collusive agreement, on any ground whatsoever.

Any agreement which is found to be collusive under the Competition Act will be void and prohibited under the Act. The Commission may also give such directions it deems fit and/or impose financial penalties on the enterprise(s) concerned.

Fines

Collusive agreement is penalised by fines under the Competition Act 2007. The fines imposable on each member of the cartel is 10% of their turnover. If the breach is more than one year then the 10% turnover is multiplied by the number of years during which the collusive agreement existed.

Click here for more information on fines and leniency.

Leniency

An enterprise may avoid the fine imposable on cartels if it comes forward and disclose the cartel to the Competition Commission. The disclosure will help the Commission to put an end to the cartel and also to fine the other business that have participated in the cartel.

Click here for more information on fines and leniency.

Protection of informants

Section 51A of the Competition Act 2007 guarantees that the information and the identity of an informer will, at the request of the informer, be treated as confidential between the Commission and the informer.

The Commission therefore encourages anyone with information on a cartel to come forward and disclose such information to the Commission in full confidence that their identity will not be disclosed and will be kept confidential.

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