Agreements Between Competitors on Prices or Market Allocation: Legal Risks for Companies

Agreements between competitors on prices or market allocation are among the most serious forms of restrictive practices under Egyptian competition law because their consequences may extend beyond regulatory exposure to criminal liability, substantial fines and personal liability for the person responsible for actual management. The issue is particularly sensitive in trade associations and chambers of commerce, tenders, distribution networks and exchanges of commercially sensitive information, where unlawful coordination between competitors may amount to a cartel even without a written contract or formal agreement.

I. What Is a Prohibited Horizontal Agreement?

Article 6 of Competition Protection and Prohibition of Monopolistic Practices Law No. 3 of 2005 prohibits agreements or contracts between competing persons in a relevant market where they have the effect of producing one of the forms specified by law, including price fixing, market allocation, bid coordination, or restriction of production, distribution or marketing.

The agreement does not need to be in writing. It may be inferred from correspondence, meetings, patterns of conduct or coordination among competitors where the evidence demonstrates a common understanding.

II. Price Fixing Is Not Limited to Setting One Uniform Price

The prohibition is not limited to an agreement on a single final selling price. It may also cover agreements to raise, reduce or maintain prices, standardise profit margins, discounts, payment terms or other factors capable of influencing buying or selling decisions.

Companies should therefore avoid discussing future prices, discount plans or pricing policies with competitors, even in informal settings.

III. Market and Customer Allocation

Article 6 covers market allocation by geographic area, distribution centre, customer category, product, market share, season or time period.

A violation may therefore arise where competitors agree that each will leave a governorate, sector or major customer to the other in exchange for reciprocal non-competition.

IV. Bid Rigging in Tenders and Offers

Coordination concerning participation in or abstention from tenders, auctions, procurement exercises and other supply offers is prohibited. This may appear as cover bidding, pre-arrangement of the winning bidder, bid rotation among a group of companies, or an agreement not to compete in a particular procurement.

The tender does not have to be governmental for Article 6 to apply; the provision extends to supply offers more generally.

V. Restricting Production or Distribution

The prohibition also covers agreements between competitors to restrict production, distribution or marketing or limit the availability of a product or service.

Such arrangements may be intended to create artificial scarcity or maintain a particular price level and fall at the core of cartel conduct.

VI. Must the Relevant Market Be Defined in Every Case?

The relevant market remains a central concept in competition law and comprises a product dimension and a geographic dimension under the Executive Regulations.

In explicit horizontal agreements such as price fixing or market allocation, practical focus often falls on proving competition between the parties and the nature of the prohibited arrangement, while market definition remains an important element of the legal and economic analysis.

VII. Fines for Violating Article 6

Violation of Article 6 is punishable by a fine of not less than 2% and not more than 12% of the total revenues of the product concerned during the period of the violation. Where revenue cannot be calculated, the law provides for alternative fixed monetary thresholds.

The minimum and maximum fine are doubled in the event of recidivism and also where the undertaking fails to implement ECA decisions issued to remove the violation under Article 20.

VIII. There Is No General Automatic Confiscation of Profits

It is inaccurate to generalise that every violation of Article 6 results in confiscation of profits. The principal penalty under Article 22 is the fine calculated according to the statutory percentages or monetary limits.

Other financial or civil consequences may arise in particular circumstances, but they should not be confused with the principal statutory penalty.

IX. Publication of Final Judgments

Article 24 requires publication of final judgments of conviction for offences referred to in Article 22 in the Official Gazette and in two widely circulated daily newspapers at the convicted person’s expense.

This consequence may carry significant reputational implications, particularly for listed companies and major suppliers.

X. Liability of the Person Responsible for Actual Management

Article 25 provides that the person responsible for actual management of a legal person is subject to the same penalties where knowledge of the violation is established and failure to perform management duties contributed to the commission of the offence.

Not every board member is automatically liable. Knowledge, the role in actual management and contribution to the violation must be established.

XI. Joint Liability of the Legal Person

Article 25 also provides that the legal person is jointly liable for payment of financial penalties and compensation where the violation is committed by one of its employees in the name or for the benefit of the legal person.

This is different from stating that the company is convicted under the same concept of personal criminal liability applicable to an individual.

XII. Procedural Restriction on Initiating Criminal Proceedings

Article 21, as amended, provides that criminal proceedings or investigative measures concerning acts violating the Competition Law may not be initiated except upon a written request from the Chair of the Egyptian Competition Authority following approval by a majority of the Board members, subject to the statutory exceptions.

Accordingly, an ECA report or the opening of an examination does not, by itself, mean that criminal proceedings have been formally initiated.

XIII. Settlement of Competition Violations

The law permits the ECA Board, with approval by a majority of its members, to settle violations depending on the procedural stage. Before a request to initiate criminal proceedings, settlement may be concluded against payment within the statutory range; after the request and before a final judgment, a higher monetary range applies.

Settlement is treated as a waiver of the request to initiate criminal proceedings and results in termination of the criminal proceedings concerning the settled conduct.

XIV. Immunity Programme for the First Reporter

For Article 6 offences, Article 26 provides that criminal proceedings shall not be brought against the first participating offender who reports the offence to the ECA and provides evidence that reveals the offence and proves its elements.

For other offenders, the court may exempt the defendant from half of the prescribed penalty where that defendant contributed to revealing the elements of the offence or proving them. Full immunity is therefore not automatically available to every person who cooperates later.

XV. Not Every Exchange of Information Between Competitors Is Prohibited in Itself

Exchange of certain public, historical or aggregated information may be lawful, while risk increases significantly when competitors exchange future prices, sensitive costs, production plans, customer data or discount strategies.

The nature, timing and granularity of the information, and the extent to which it can facilitate coordination between competitors, should be assessed.

XVI. Meetings Within Chambers and Professional Associations

Membership in a chamber of commerce or professional association is lawful in itself. However, meetings that shift into discussions of prices, customers or future market plans may create significant competition risk.

Best practice includes a clear agenda, accurate minutes and immediate withdrawal from any unlawful discussion with the objection formally recorded.

XVII. Correspondence and Instant Messaging

Emails, messaging applications and work-group chats may become evidence of coordination where they contain discussions concerning prices, customer allocation or tender outcomes.

Sales and marketing teams should therefore be trained not to use informal communication channels to discuss competitively sensitive information with competitors.

XVIII. Limits on Inspection and Enforcement Powers

The Egyptian Competition Authority has powers to request information and documents and to use officers with judicial enforcement powers within the limits prescribed by law. Inspections and seizure measures may occur within the applicable legal framework.

However, using the term “dawn raid” should not imply an unrestricted power to enter every premises or seize every document without regard to statutory safeguards, authorisations and procedures.

XIX. Invalidity of Non-Compliant Agreements

Article 20 provides that where a violation of Articles 6 or 7 is established, the ECA orders the offender to correct its position and remove the violation; otherwise, the offending agreement or contract becomes void under the provision.

It is therefore inaccurate to state that every commercial contract implemented within the broader relationship automatically becomes void. The specific offending agreement or clause and its relationship to other contracts must be identified.

XX. Damages Claims

A person who suffers loss from a restrictive practice may claim damages where fault, damage and causation can be established under the general civil-law rules.

Egyptian law does not provide an automatic system equivalent to certain foreign regimes that awards multiplied damages merely because an ECA decision has been issued.

XXI. Government Tenders and Debarment

Bid rigging may have consequences under both competition law and public procurement legislation and tender conditions. However, debarment from tenders or forfeiture of bid security does not automatically follow every competition-law violation.

The relevant administrative decision, tender conditions and Public Contracts Law No. 182 of 2018 should be reviewed before determining the consequence.

XXII. Vertical Agreements Are Not Governed by Article 6

Restrictions imposed on distributors or customers may fall within vertical agreements under Article 7 rather than Article 6, unless the distributor is also a competitor or there is another horizontal relationship.

A distinction must therefore be drawn between a horizontal cartel and distribution or resale restrictions.

XXIII. Resale Price Maintenance

Imposing resale prices may create competition concerns in vertical agreements depending on the relationship and its effects, but it is not automatically equivalent to a horizontal cartel between competitors.

The agreement, market and commercial restriction should be analysed under Article 7 and the Executive Regulations.

XXIV. Extraterritorial Application Outside Egypt

The law applies to conduct committed outside Egypt where it results in preventing, restricting or harming freedom of competition within Egypt and constitutes an offence under the law.

International groups should therefore assess regional arrangements that may have effects within the Egyptian market.

XXV. Foreign Competition Laws

A multinational company may simultaneously be subject to competition laws in other jurisdictions where cartel effects extend to those markets, depending on each jurisdiction’s rules of competence.

The opening of an investigation in Egypt does not automatically trigger a foreign investigation.

XXVI. What Should a Company Do if It Discovers Suspicious Communications?

The company should immediately stop any unlawful communication, preserve documents, avoid deleting messages, and begin a legally supervised internal review to identify the parties involved, relevant period and scope of information exchanged.

It should also rapidly assess whether the immunity programme remains available before the ECA becomes aware of the conduct, because priority of reporting is critical.

Practical Checklist Where a Prohibited Agreement Is Suspected

Who are the participating competitors?
What information or decisions were exchanged?
Did the discussions concern prices, discounts, customers, territories or bids?
Are there emails, minutes or messaging groups evidencing coordination?
Was the arrangement actually implemented or did it remain at the discussion stage?
Who made the decision within the company?
Is there an opportunity to benefit from the immunity programme?
Is there an obligation to cease an ongoing practice or amend contracts?
Are there contracts or tenders that may be affected by the conduct?

XXVII. Common Errors

Common errors include assuming that an oral agreement cannot be penalised, that use of a professional association makes the discussion lawful, or that information exchange is harmless so long as no final price is expressly agreed.

Other errors include confusing a horizontal agreement between competitors with a vertical restriction involving a distributor, or assuming that immunity remains available with the same effect after the priority-to-report requirement has been lost.

XXVIII. Practical Best Practices

Competition-compliance programmes should contain clear rules for meetings with competitors, information exchange, tenders, professional associations and immediate escalation to the legal function.

It is also advisable to retain independent internal reasons for pricing decisions, train employees to withdraw from unlawful discussions, and conduct periodic reviews of high-risk correspondence.

When Is Specialist Legal Counsel or Local Counsel in Egypt Necessary?

Legal intervention becomes necessary upon receiving an information request from the Egyptian Competition Authority, before attending a sensitive industry meeting, upon discovering messages or potential agreements with competitors, or when assessing immunity or settlement.

Local Counsel can define the scope of Article 6, manage the internal review, preserve evidence, draft responses, and represent the company before the ECA, Public Prosecution and Economic Court.

How Can Specialist Legal Support Help?

El Rouby Law Firm reviews pricing, distribution and tender policies, designs competition-compliance programmes, reviews distribution, agency and franchise agreements, and assesses information-exchange risks.

The firm also supports internal investigations, immunity applications, settlement, litigation, and representation of companies before the Egyptian Competition Authority, Public Prosecution and competent courts.

Conclusion

Agreements between competitors concerning prices or markets are among the highest competition-law risks in Egypt. Liability assessment nevertheless requires proof that the parties compete, identification of the prohibited arrangement, and analysis of the role of actual management. El Rouby Law Firm can review an agreement, meeting or tender or conduct a preventive competition and compliance assessment.

Frequently Asked Questions

What Is the Penalty for Price Fixing Between Competitors?

Article 22 provides for a fine ranging from 2% to 12% of the total revenues of the product concerned during the period of the violation, with an alternative fixed monetary penalty where revenues cannot be calculated.

Does an Oral Agreement Between Competitors Fall Within the Prohibition?

Yes. Where the existence of an agreement or coordination falling within Article 6 can be proven, a written contract is not required.

Does the First Cartel Participant to Report Receive Full Immunity?

For Article 6 offences, criminal proceedings are not brought against the first offender who reports the conduct and provides sufficient evidence to reveal the offence and establish its elements in accordance with Article 26.

Are All Board Members Liable?

No. Article 25 links liability of the person responsible for actual management to proof of knowledge and that the failure to perform management duties contributed to the offence.

Does Every Contract Connected with the Violation Become Void?

No. The specific offending agreement or contract and the effect of Article 20 on it must be identified. Invalidity of all other contracts should not be presumed automatically.

Is Bid Rigging a Competition Offence?

Yes. Coordination concerning participation in or abstention from tenders, auctions and other supply offers is one of the prohibited forms under Article 6.