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 27 July 2008
Department for Innovation, Universities and Skills (DIUS)
 
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Competition Act 1998 'modernisation’ Regulation

Regulation 1/2003 (the ‘modernisation’ Regulation), which was adopted in November 2002 and came into force on 1 May 2004, replaces Regulation 17/62 and radically reforms the framework of European competition law.

The Regulation has four main effects.

• It abolishes notifications - the excessively bureaucratic system by which companies must notify an agreement to the Commission to obtain the legal certainty provided by an individual exemption under Article 81.

• It sets minimum standards of competition enforcement and, in doing so, levels the playing field for competition scrutiny of commercial agreements across Europe. It achieves this by:

- allowing national competition authorities (NCAs) and national courts in Member States to apply Article 81 in full;

- requiring that Article 81 and 82 must be applied in parallel to domestic competition legislation to agreements or conduct that may have an effect on inter-state trade;

- requiring that decisions under national competition law must not reach a different outcome from the decision which would be reached under Article 81.

• It requires that Member States co-operate closely in enforcing competition law and provides for the exchange of information and for investigations on each other’s behalf. To facilitate this process, a network of European competition authorities (the European Competition Network or ECN) has been established.

• It strengthens and clarifies the Commission’s powers of investigation, widens the range of available remedies and provides tougher sanctions for procedural infringements.

The Regulation has direct application in the UK. It provides powers for our domestic competition authorities to pursue infringements of the Treaty Articles on competition. However the Regulation does not prescribe the procedures that NCAs should follow.

It enables Member States to give effect to the Regulation by applying powers under national procedural law. To achieve this, the Government therefore needs to –

• Designate UK NCAs and national courts for the purposes of the Regulation (the NCAs will be the Office of Fair Trading (OFT) and the sectoral regulators to the extent that they have concurrent powers under the Competition Act 1998, courts will include the Competition Appeal Tribunal (CAT);
• Lay down the procedures to be followed by UK NCAs when investigating and enforcing Articles 81 and 82;
• Specify what penalties are applicable to infringements under Articles 81 and 82;
• Specify how any additional remedies provided for by the Regulation will operate;
• Provide for appeals against decisions of the NCAs under Articles 81 and 82.

The Regulation also raises issues concerning the structure of the UK’s domestic competition regime, as the Competition Act was drafted to mirror the system at EC level as far as possible (it created prohibitions based on those available in Articles 81 and 82 and it provides for notification of agreements in much the same manner as Regulation 17/62 and for exemption of agreements under the same exemption criteria).

The purpose of mirroring the EC system as governed by Regulation 17/62 was to relieve the burden on business of complying with two separate competition regimes. The changes to the EC regime brought about by modernisation would have created a mis-alignment between the system established under the Competition Act and the Regulation if the Competition Act had remained unchanged.

The Government believes that it is in the best interests of both business and the competition authorities that the procedures and approaches employed by the UK competition authorities are similar under both the Chapter I and Chapter II prohibitions and under Articles 81 and 82.

Whilst this is not strictly required by the Regulation, it will create greater transparency and certainty for business about the steps these authorities will take when investigating suspected infringements of UK or EC competition law.

Following two public consultations in 2003, new legislation took effect on 1 May 2004.

 

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