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OFT
reviews supermarkets ‘price fixing case’
The Office of
Fair Trading is now studying statements and evidence from some of the UK’s
biggest dairies and supermarket chains who’ve been accused of colluding to
increase prices.
The companies
involved in the investigation are Asda, Morrisons, Safeway, Sainsbury and Tesco,
together with dairy processors Arla, Dairy Crest, Lactalis McLelland, The Cheese
Company and Wiseman.
The OFT has
already published a provisional finding that these companies “engaged in fixing
the retail prices for milk, butter and cheese, in breach of the Competition Act,
by sharing highly commercially sensitive information, including details of the
levels of price increases, over a two year period (2002 and 2003)”.
It said that
this practice was harmful to consumers because it restricted competition and so
led to higher prices.
The OFT
Executive Director, Sean Williams, said: “We believe supermarkets have been
colluding to put up the price of dairy products. Consumers have lost out to the
tune of hundreds of millions of pounds. This kind of collusion on price is a
very serious breach of the law.
“Businesses
should understand that where we find evidence of this kind of anti-competitive
activity we will use the powers at our disposal to punish the companies involved
and to deter other businesses from taking such actions.”
The Competition
Act 1998 prohibits arrangements that restrict competition.
The OFT is
reviewing statements from the companies and other interested parties before
making a final decision on whether or not the law has been breached. A decision
is not expected until late next year.
Landlords must inform
tenants of their rights
New regulations
mean that landlords and managing agents now have to provide a summary of a
tenant’s rights and obligations when they send out a demand for service charges.
The provision
is contained in the Commonhold and Leasehold Reform Act 2002 and is effective
from 1st October.
Service charges
are often the cause of disputes between landlord and tenant. The Government
hopes the new legislation will reduce conflict by making the system more
transparent. The summary must be written in plain language and contain specified
information relating to the tenant’s rights.
The summary
will have to be sent out with each demand for payment, even if that is several
times a year.
Landlords need
to keep accurate records of any costs they incur because tenants are entitled to
request a detailed breakdown of service and administration charges, including
how much was spent and what it was spent on. If landlords fail to produce
detailed and accurate information when requested to do so then tenants are
entitled to withhold payment.
If a tenant
then disputes the charges he can challenge them at a Leasehold Valuation
Tribunal.
New code of duties for directors
Company
directors now have a new set of duties which require them to consider the wider
interests of employees, the community and the environment when making important
decisions.
The new code is
part of the Companies Act 2006 and is effective from 1st October this
year. One of the main purposes of the Act is to promote “enlightened shareholder
value”. It means that directors must broaden their horizons when exercising
their duties.
In promoting
the good of the company they must take into consideration not only shareholders
but also a wide range of ‘stakeholders’ who may be affected by the company’s
actions. These would include staff, customers, suppliers, the local community
and the environment.
This has
alarmed some directors who wonder what might happen when what’s good for the
company and what’s good for stakeholders might clash. For example, directors may
find that they need to make staff redundant for the overall good of the firm.
However, that would not be in the interests of the redundant staff who are still
stakeholders.
Or there could
be a situation where it might be necessary to close a branch office. Again, that
may be good for the firm but perhaps bad for the local community and local
suppliers.
There have been
fears that this could lead to a rise in litigation from disgruntled stakeholders
who feel that a company has failed to act in their best interests. This seems
unlikely, however, as long as directors act in good faith and make their
decisions on the basis of what will benefit the company and its stakeholders as
a whole.
It’s easy to
see how the examples given above might fit this criterion. Making staff
redundant or closing branch offices may be to the detriment of those directly
affected but still be in the best interests of the company and the majority of
stakeholders.
Looked at this
way, many responsible directors may wonder what has really changed as they have
always run their businesses with an eye to the bigger picture of how their
decisions affect all those involved in their company. The Government
recognises
this and acknowledges that to a large extent, the code is basically turning what
is custom and practice for most firms into a statutory obligation for all
firms.
Lord Goldsmith,
the former Attorney General, believes there is no reason why the code should
lead to an increase in litigation. He said: “The need to have regard to the
interests of employees as part of the main duty to promote the success of the
company was part of case law before becoming statute. We have no reason to
expect that there will be a greater degree of litigation on those duties than
there is now.”
It means that
directors should have nothing to fear from the code if they follow the correct
procedures. It will not be enough to simply engage in a box ticking exercise.
They need to be able to show that they have considered the interests of
stakeholders. However, that doesn’t mean they have to
favour
one group over another or shirk away from making difficult decisions.
The former
industry minister Margaret Hodge said: “The Government believes that our
enlightened shareholder value approach will be mutually beneficial to business
and society. We do not, however, claim that the interests of the company and its
employees will always be identical; regrettably, it will sometimes be necessary,
for example, to lay off staff.
“The decisions
taken by a director and the weight given to the factors will continue to be a
matter for his good faith judgment.”
The Companies
Act introduces other changes which also came into effect on 1st
October this year. They relate to the way shareholders in private companies make
decisions and the streamlining of meetings.
Written
resolutions are already used as an alternative to calling meetings of
shareholders. Now such resolutions no longer need to be signed by all the
shareholders. A simple majority will suffice for ordinary resolutions and a 75%
majority for special resolutions.
Private
companies no longer need to hold an annual general meeting. Shareholders,
however, can demand a meeting if at least 10% ( or 5% in certain circumstances )
wish to do so. Shareholders retain the right to receive accounts. Shareholder
meetings can be on a 14 day notice period unless otherwise stated in the
company’s articles.
More sections
of the Companies Act will come into effect next year.
Councils offered
£500m to help release building land
The Government
is making £500m available to local councils to encourage them to promote the
building of more houses by speeding up the process of releasing land suitable
for development.
The Housing and
Planning Delivery Grant (HPDG) will provide local councils with incentives to
maximise
the supply of building land in their areas and speed up the delivery of new
housing. It’s part of the Government’s drive to build 240,000 new homes a year
to meet its target of providing an extra three million homes by 2020 as set out
in the Housing Green Paper published in July.
A total of
£500m is being made available to reward successful councils. Under the scheme,
local authorities will be asked to “identify at least 5 years’ worth of sites
ready for housing and a further 10 years worth for future development”.
Councils will
be rewarded if they meet agreed timetables to accelerate the delivery of new
homes. Those timetables will oblige authorities to provide details of both the
number and type of homes needed in their area. They will also need to identify
land that is both suitable for new homes and capable of being made available.
Concern for the
environment is at the heart of the new house building drive with the emphasis on
providing green homes on brownfield sites. The Government has already identified
750 major brownfield sites which are being assessed for development suitability
and councils are being encouraged to identify more.
House builders
are being urged to sign up to the 2016 commitment to ensure that all new homes
are carbon zero within a decade.
The Housing and
Planning Minister, Yvette Cooper, said: "This money is about extra support for
the councils which are already doing their bit. Some of them are doing a lot of
work to support additional housing, but we know that others really need to do
more. I want this new cash injection to push local authorities to raise their
game."
The first
payments under the new HPDG scheme will be made next year.
Firms must act now to
protect their trademarks
Firms could lose
control of their trademarks because of new regulations unless they take action
now to protect themselves.
The problem arises
because the way trademarks are monitored is changing to the European system
which requires firms to be more vigilant.
In the past, a
trademark application would automatically be blocked by the Patent Office if it
was considered to be too similar to an existing mark. That is no longer the case
because of new regulations introduced on 1st October.
The new UK
Intellectual Property Office, which has replaced the Patent Office, will no
longer block applications but merely inform the existing brand holder that
someone else is try to register a similar trademark.
It will then be up
to the existing holder to formally oppose the application. The new system means
companies will have to be more pro-active in protecting their brand.
The problem is
even worse for the owners of European and international trade marks. Only
companies with UK-registered trade marks will be automatically notified if
there’s a rival application. Those with trade marks registered elsewhere won’t
be informed at all unless they subscribe to the IPO’s notification service.
The subscription
costs £50 and lasts for three years.
The IPO has asked
that applications for the notification service should be filed before 20th
October so firms need to hurry if they want to ensure they are fully protected
Government to crack down
on rogue employers
The Government is
introducing a series of new measures to deter rogue employers from exploiting
their workforce.
The Business and
Enterprise Secretary, John Hutton, announced that there will be higher maximum
fines for companies that fail to pay the minimum wage. He also plans to double
the number of inspectors who crack down on abuses in employment agencies.
There will also
be tougher powers to enable inspectors to gather evidence and unlimited fines
for those they catch.
However, Mr
Hutton said it would be wrong to think that all agency workers were treated
unfairly and referred to TUC research which showed that some people preferred
agency work to having a full time job. He promised that there would be a
renewed push to reach a lasting solution to agency worker rights across the
European Union but said that any new policy would only receive Britain’s support
if it passed two tests.
He said:
"Firstly does it
protect jobs and advance the fundamental right to work? Will it continue to
allow companies to go on creating jobs and promote rising national prosperity?
"And secondly,
will it make a positive change to the most vulnerable working people? Where we
meet those tests, we will take action."
Euro
officials to investigate credit rating industry code
The European
Commission is stepping up its review of the credit rating industry in the wake
of the sub-prime mortgage crisis.
Officials are
concerned that the sector was too slow to warn of the risks posed by the
increasing number of loans being given to people with poor credit records.
Brussels will scrutinise the industry’s voluntary code which is designed to
avoid conflicts of interest in situations where credit agencies might be asked
to rule on firms with whom they have business relationships.
The review will
consider whether legislation is needed to give the code more weight.
The
investigation is being led by Charlie McCreevy, the European Union Internal
Market Commissioner. In the past, Mr McCreevy has been reluctant to press for
more regulatory control but he has expressed concern over whether credit
agencies are sometimes faced with conflicts of interest and whether they react
quickly enough to changing market circumstances. He believes the industry needs
to improve its overall performance.
The review is
expected to take until next year to complete.
