What Does the Act Do?
The Competition Act 1998 reforms and strengthens UK competition law by prohibiting anti-competitive behaviour. It introduces two basic prohibitions:-
• a prohibition of anti-competitive agreements, based closely on Article 81 of the EC Treaty; and
• a prohibition of abuse of a dominant position in a market, based closely on Article 82 of the EC Treaty.
The prohibitions will be enforced primarily by the Director General of Fair Trading. The utility regulators will have concurrent powers in their particular sectors (more about concurrent powers). Companies breaching the prohibitions will be liable to financial penalties and third parties affected by anti-competitive behaviour in breach of the prohibitions will be entitled to seek compensation.
The prohibition approach of Articles 81 and 82 of the EC Treaty is directly effective in Member States where there is an impact on trade between Member States. The domestic regime under the Bill is closely aligned to the EC counterpart.
These prohibitions will replace the Restrictive Trade Practices Act 1976, the Resale Prices Act 1976, the majority of the Competition Act 1980 and related provisions in other legislation concerned with competition. Click here for more detailed information on the Competition Act 1998.
The prohibition of anti-competitive agreements (Chapter I Prohibition)
The Act will prohibit agreements which have the object or effect of preventing, restricting or distorting competition in the UK. Since anti-competitive behaviour between companies may occur without a clearly delineated agreement, the prohibition covers not only agreements but also decisions by associations of companies and concerted practices. There is an illustrative list of practices which would infringe the prohibition.
Under the prohibition, the anti-competitive nature of the agreement is to be judged according to its effects or intended effects on competition. This is in contrast to the form-based approach in the current restrictive trade practices legislation which is limited to cover agreements which are registrable because they meet certain specified form-based criteria. Click here for more detailed information on the Chapter 1 prohibition.
The prohibition of abuse of dominant position (Chapter II Prohibition)
The second prohibition introduced by the Act is the prohibition of abuse of a dominant position in the UK or part of it, where this affects trade within the UK. Again there is an illustrative list of the kind of conduct which may constitute an abuse, such as limiting production, markets or technical development to the detriment of the consumer. Behaviour which infringes the prohibition will be unlawful and subject to penalties.
The prohibition of abuse of a dominant market position will become the principal tool for dealing with anti-competitive conduct by monopolists. The monopoly provisions of the Fair Trading Act will, however, continue to have some value, albeit in strictly limited circumstances, in the future.
The complex monopoly powers of the Fair Trading Act fill a gap between the two prohibitions. They allow investigation of markets where there is parallel behaviour by companies but no actual agreement.
The scale monopoly powers provide structural remedies but would only be used where there has been a prior finding of abuse and the DGFT believes that there is a real prospect of further abuses by the same firm. This policy does not apply to the regulated utility sectors. The Utilities Green Paper, "A Fair Deal for Consumers", makes clear that full use of the scale monopoly provisions is to be retained for these sectors. There is further information on the Office of Fair Trading web site.