07 December 2017 by Robert Bell
The travelling showmen case is a wakeup call on how competition law applies to small trade associations
Major industry trade associations have long been aware of how competition law can affect their rules and how their members interact with each other.
But the Competition and Markets Authority (CMA) case against the Showmen’s Guild of Great Britain shows how smaller, more niche trade associations can be unaware of their obligations under Article 101(I) of the Treaty on the Functioning of the European Union and Chapter I of the Competition Act 1998 – as well as how easily they can find themselves in breach of the rules.
The guild is an association of travelling showmen that make their living by working at funfairs.
It is organised on a regional basis through a series of regional offices or sections. Each section has its own elected section committee and they are responsible for managing the guild’s affairs and members for that region.
The CMA estimates that around 90% of active showmen in the UK are members of the guild and that around 90% of fairs in the UK are organised by one of its members, meaning the vast majority of fairs in the UK are covered by the guild’s rules.
Like other trade associations, the guild’s main aim is to protect the interests of its members, which it does through a set of rules for members, as well as through certain legal and constitutional processes relating to the land they hold funfairs on.
“Although guild rules do not apply to non-members, they can affect non-members’ business”
The guild informed the CMA that there are around 200 amusement fairs a week, held between Easter and 5 November, with many others held at other times of year.
These fairs are normally short-lived, variously-sized, and put on by showmen who travel around the country with their amusements, such as rides, other attractions and refreshment stalls.
Most fairs are held on local authority land, but some take place on common or private land. The landowner receives rent from the fair organiser for access to the land, and in turn the fair organiser receives rent from the showmen, who operate or supervise the operation of amusements.
The guild has over 400 rules and sub-rules which govern its members’ conduct. Members of the guild agree to adhere to its rules on joining. Even so, the members are also showmen who compete with each other in organising fairs and running amusements.
The CMA found that although guild rules do not apply to non-members, they can affect non-members’ business through restricting their access to guild membership and preventing them from operating amusements at guild-organised fairs.
In December 2015, the authority started investigating a suspected guild breach of the Chapter I prohibition of the Competition Act 1998, having previously received complaints about the guild and the way its rules excluded non-members from the market.
A year later, the authority issued a statement of objections to the guild, expressing its provisional view that the association’s rules restrict members from competing with one another to organise or attend fairs and also stop members from starting new fairs in competition with existing fairs.
Under property law, showmen do not have protected access to land for holding a fair, or to participate in a fair. However they need some stability to operate a viable business.
The guild has sought to address this by creating a form of protected right to the ground for holding a fair or within a fair (an ‘established right’), and a mechanism for the allocation of such rights between its members.
The established right was enjoyed by members of the guild who have organised a fair for the previous two years, or have provided amusements on ground at a fair for the previous two years. Once they had fulfilled those criteria they had an established right to organise that fair, or occupy the ground in question at that fair, for the following year.
This right amounted to a priority right, year by year, to occupy the position of fair organiser or provide an amusement at the same ground, on an exclusive basis indefinitely, so long as they adhered to the guild’s rulebook.
As well as expressing concern at other rules of the guild that restrict competition, particularly with non-member showmen, the CMA was critical of the guild’s membership application process.
It found that the guild’s assessment of membership applications was not based on an exhaustive list of objective and transparent criteria.
“The rules work together to unfairly protect incumbent guild members and their fairs from competition”
A showman who seeks membership needs support from a proposer and seconder (who are actual or potential competitors of the applicant) and does not know on what basis it will be assessed by those making the final decision on the application.
The decision to approve or reject an application is ultimately taken at the discretion of a section committee, which also comprises actual or potential competitors of the applicant.
There is no objective or transparent criteria for assessing membership applications and there is no appeal procedure against decisions of the section committee.
The CMA considered that the rules of the guild may affect trade and restrict competition within the UK, in breach of the Chapter I prohibition. Overall, the authority provisionally concluded that the rules of the guild restrict competition both at existing guild fairs, and between guild and rival fairs.
The rules work together to unfairly protect incumbent guild members and their fairs from competition. In so doing, they reduce the prospect of greater choice, further innovation and better service at fairgrounds.
Section 31A of the Competition Act gives the CMA the power to accept binding promises offered to it by investigated parties to address any competition concerns that it has identified after investigating potential breaches of the prohibitions in Chapter I or Chapter II of the Competition Act 1998, or of Articles 101 and 102 of the Treaty on the Functioning of the European Union.
The CMA invited comments on 22 August 2017 on its intention to accept commitments offered by the guild to address competition concerns about some of its rules, namely that the guild had offered to amend its rules.
The proposed changes would:
Following the consultation on the proposed commitments, the CMA concluded that this is an appropriate case in which to accept the offer, doing so on 26 October 2017.
The authority decided the competition concerns were readily identifiable and the proposed commitments addressed the identified fears. The new rules would set out express and clear restrictions on the conduct of members in relation to both dealings with fellow members and non-members.
In addition, the lack of transparency and objective criteria in the guild’s old rules would be replaced, making it easier for those wishing to gain membership to do so.
The commitments will also amend the guild’s rules to remove or appropriately cut the restrictions faced by guild members and non-member showmen organising and participating in the fairs organised by guild members.
The CMA found that the commitments can be implemented effectively and, if necessary, at short notice. Compliance with the commitments will be achieved through amendments to the guild’s rulebook and, in this way, the proposed commitments would be implemented and enforceable by the guild against its own members.
The guild will implement the rule changes by a vote at its central council, taking place no later than 31 January 2018, in accordance with the provisions from its rulebook governing such changes.