Midlands businesses should be on their guard against breaches of competition law which could lead to a "dawn raid" by the Office of Fair Trading.
New legislation has resulted in the UK having one of the toughest competition law regimes in the world with the OFT having the power to take drastic action if it suspects that the rules are being broken, warns law firm Shoo-smiths, which has a Birmingham office.
It is vital for all companies to ensure their employees understand what the law prohibits and that their business arrangements comply with its requirements, said Sarah Livestro, a competition team lawyer.
Otherwise they run the risk of an unwelcome visit from the OFT.
Ms Livestro cautioned that competition law bans companies from entering anti-competitive agreements, including those made verbally.
"Those that do so can be fined up to ten per cent of their worldwide turnover and could also be sued for damages by third parties," she warned.
"Directors can be disqualified and individuals who are involved in cartel behaviour, such as price fixing or bid rigging, may be prosecuted and imprisoned for up to five years."
The OFT has wide powers in cartel investigations. It can conduct covert surveillance and carry out an unannounced "dawn raid" search of business and domestic premises, examine computer records, seize documents and question individuals.
Ms Livestro said: "The OFT is determined to stamp out serious anti-competitive practices, irrespective of whether the participants are large multi-national companies, SMEs or sole traders. Small or medium-sized companies cannot assume that the OFT will not be interested in investigating them if it suspects that they have been involved in cartel behaviour."
However, in certain circumstances, total or partial immunity from penalties can be granted by the OFT to participants, either companies or individuals, if they turn "whistleblower" on the cartel.
"Whistleblowing is becoming increasingly common, as companies aim to get 100 per cent immunity from fines by being first through the OFT's door with evidence of a cartel," said Ms Livestro.
"All companies, whatever their size, need to ensure that they are complying with competition law, by implementing and enforcing a strict competition compliance policy. They should also make sure that procedures are in place for dealing with a 'dawn raid' so that they are not caught out if the OFT pays them a surprise visit."
Some manufacturers and retailers across the Midlands could be unknowingly breaking the rules on price fixing this Christmas, according to Pinsent Masons.
December is traditionally the time of the year when manufacturers and their distributors are in discussion about revising their pricing strategies for the coming year, taking into account overheads and the rising cost of raw materials.
However competition law prohibits a situation where a supplier and one of its distributors agree the prices at which the distributor will resell goods in the UK - such as in the recent case of Oakley, a supplier of branded sunglasses, and House of Fraser.
The OFT provisionally concluded that Oakley had engaged in price fixing by supplying HoF with its sunglasses on the condition that the retailer agreed to sell them at prices no lower than it suggested.
The law also prohibits certain types of discussions taking place about prices and discounts between suppliers and distributors such as in the case involving several companies, including a number of high street sports retailers, fixing the price of England and Manchester United replica football kits.