The Competition Act 1998 came into force on the 1 March 2000. It introduces two main prohibitions:

Chapter I: a prohibition of anti-competitive agreements, based closely on Article 81 of the EC treaty; and

Chapter II: a prohibition of abuse of a dominant position in a market, based closely on Article 82 of the EC Treaty.

Key aspects of the new legislation are:

• anti-competitive agreements, cartels and abuses of a dominant position are now unlawful from the outset;
• businesses which infringe the prohibitions are liable to financial penalties of up to 10% of UK turnover for up to 3 years ;
• competitors and customers are entitled to seek damages;
• the Director General of Fair Trading has new powers to step in at the outset to stop anti-competitive behaviour;
• investigators are able to launch 'dawn raids', and to enter premises with reasonable force; and
• the new leniency policy will make it easier for cartels to be exposed

The intention is to create a regulatory framework that is tough on those who seek to impair competition but allows those who do compete fairly the opportunity to thrive.

The Act 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. Click here for more detailed information on the Chapter 2 prohibition.

The Competition Commission

The Competition Commission came into being on 1 April 1999. The Commission has taken on the reporting functions of the MMC. It will also house an Appeals Tribunals, which will hear appeals against the Director General’s decisions. Click here for more information on the Competition Commission.

Regulation 1/2003 (the ‘modernisation’ Regulation), which was adopted in November 2002 and comes 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 will create a mis-alignment between the system established under the Competition Act and the Regulation if the Competition Act remains 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.

The Government issued two consultation documents, in April and June 2003, on proposed changes to the domestic regime and its response to these on 16 January 2004. Links to these documents and the draft Regulatory Impact Assessment are below.

It is intended that the new legislation will take effect on 1 May 2004.

(102 pages) Public consultation on the Government’s proposals amend the Competition Act 1998 to give effect to Regulation 1/2003.
(85 pages) Public consultation on the Government’s proposals for exclusions and exemptions from the Competition Act 1998 in light of Regulation 1/2003 EC.(19 pages) Government response to consultation.
(46 pages) Draft Regulatory Impact Assessment. 

The following is a list (most recent first) of statutory instruments introduced under the Competition Act 1998. These are linked to the relevant page of the Stationery Office website (where available).

Statutory Instrument 2005 No.3347 The Competition Act 1998 (Public Transport Ticketing Schemes Block Exemption) (Amendment) Order 2005.
Regulatory Impact Assessment.

Statutory Instrument 2000 No. 309
The Competition Act 1998 (Determination of Turnover for Penalties) Order 2000

Statutory Instrument 2000 No. 293
The Competition Act 1998 (Director's rules) Order 2000

Statutory Instrument 2000 No. 263
The Competition Act 1998 (Notification of Excluded Agreements and Appealable Decisions) Regulations 2000

Statutory Instrument 2000 No. 262
The Competition Act 1998 (Small Agreements and Conduct of Minor Significance) Regulations 2000

Statutory Instrument 2000 No. 261
The Competition Commission Appeal Tribunal Rules 2000

Statutory Instrument 2000 No. 260
The Competition Act 1998 (Concurrency) Regulations 2000

Statutory Instrument 1999 No. 3027
The Competition Act 1998 (Commission Investigation and Director's Investigation) Order 1999

Statutory Instrument 1999 No. 2859 (C. 74)
The Competition Act 1998 (Commencement No. 4) Order 1999)

Statutory Instrument 1999 No. 2546
The Competition Act 1998 (Application for Designation of Professional Rules) Regulations 1999

Statutory Instrument 1999 No. 2283
The Judicial Pensions (Qualifying Judicial Offices) (President of the Competition Commission Appeal Tribunals) Order 1999

Statutory Instrument 1999 No. 2282
The Competition Act 1998 (Definition of Appropriate Person) Regulations 1999

Statutory Instrument 1999 No. 2281
The Competition Act 1998 (Provisional Immunity from Penalties) Regulations 1999

Statutory Instruments 1999 No. 506
The Competition Act 1998 (Competition Commission) Transitional, Consequential and Supplemental Provisions Order 1999

Statutory Instrument 1999 No. 505 (C. 9)
The Competition Act 1998 (Commencement No. 3) Order 1999

Statutory Instrument 1998 No. 3166 (C.77)
The Competition Act 1998 (Commencement No. 2) Order 1998

Statutory Instrument 1998 No. 2750 (C.64)
The Competition Act 1998 (Commencement No. 1) Order 1998

Statutory Instrument 1998 2001 No. 319
The Competition Act 1998 (Public Transport Ticketing Schemes Block Exemption) Order 2001 

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