Recent press coverage about the world’s favourite airline and other transatlantic carriers has once again brought the question of competition law to the fore.

Since the Competition (Jersey) Law 2005 (“the Competition Law”) came into effect in November 2005, the Jersey Competition Regulatory Authority (“the JCRA”) has been making its presence felt within the island. Not only have scale fees been abandoned in relation to property transactions, but even out-of-hours medical services have been subject to scrutiny.

Although you may be aware that there is a Competition Law in the island, what might be startling is the extent to which that Law impacts on business in Jersey at all levels.

In particular, what may come as a surprise is that now, discussions between businesses about price (or indeed, trading terms, conditions or the like) are in effect prohibited by Article 8 of the Competition Law. The reason for this is that they are likely to have as their object, or effect, directly or indirectly fixing purchase or selling prices or any other trading conditions. If the JCRA got wind of the fact that you had told a competitor what you were going to do with your prices, the JCRA might legitimately ask why you had passed that information on. The obvious answer is that you probably wanted your competitor to follow your lead and to move their price for example in line with yours. If your competitor did in fact mirror your price, this might well be an unlawful practice. If however your competitor chose not to follow your lead, the very fact of your conversation might, in the eyes of the JCRA, be evidence of a willingness on your part to enter into an unlawful arrangement and the JCRA might then be very interested in whether there were any other arrangements in place.

The headline penalty under Article 39 of the Competition Law is a fine of up to 10% of the turnover of the undertaking during the period of the breach, up to a maximum period of three years. What is important to note is that it is turnover that is in issue, not profits. If the turnover is static, a business could be looking at a fine of up to 30% of this year’s turnover as a potential fine. But it’s not just the question of the fine; the on-going costs, both internal and external, of dealing with an investigation and the associated requirements to produce information and documents will be significant and may tie up the business, its officers and employees quite possibly for a considerable period. Then there is the question of reputation. The fact that a business is perceived in the market place to have been associated with anti-competitive behaviour (let alone engaged in it) will weaken its position immeasurably, even if it is eventually established that it has done nothing wrong. Business may be business but customers like to know that they have been treated fairly.

The difficulty in talking about price is that any discussion is potentially anti-competitive and unlawful. The costs and penalties that might be incurred are so significant that the leniency policy implemented by the JCRA is quite attractive. Rather than run the risk of a large fine, significant costs and untold reputational damage, the incentive is there for businesses simply to inform the JCRA of their suspicions of anti-competitive practices by their competitors. It may therefore be a race to see which business spills the beans first.

Against that background, businesses would be well advised to ensure that neither they, nor their officers nor employees have any discussions whatsoever about price or trading conditions. In particular, they should ensure that members of staff who might be prey to such discussions (for example sales representatives on the golf course) have no discussions whatsoever about price. In the event that a discussion (whether formal or informal) turns to price, they would be well advised to ensure that their employee leaves with a flourish immediately.

This does not mean that businesses cannot follow changes imposed by their competitors. We have all seen the position where businesses follow each other (banks raising their interest rates, petrol prices rising together) in response to an external pressure. This is not necessarily a concerted practice (albeit that it may look slightly suspicious), it is simply a response to something that has occurred elsewhere in the market. Following the leader in a case of price leadership is not necessarily wrong, provided it is not indicative of any more deep-rooted arrangement.

The key issue for the world’s favourite airline may be whether this was a simple case of price leadership or whether there was actually any arrangement between it and any of its competitors.