Competition Act 1998

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.

What does the Act do?

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.

Statutory Instruments

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

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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