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Overview of The Competition Law in The Uk - Assumptions and Implications
Overview of The Competition Law in The Uk - Assumptions and Implications
TOPIC
A DISCUSSION OF THE COMPETITION LAW IN THE UK-
ASSUMPTIONS, PRESUMPTIONS AND IMPLICATIONS
DECLARATION
I, Yesha Parikh, do hereby declare that this project work for the subject Competition Law, is a result of my own, original
work, under the supervision of Prof. Shrut Brahmbhatt. This work, titled A DISCUSSION OF THE COMPETITION LAW IN
THE UK- ASSUMPTIONS, PRESUMPTIONS AND IMPLICATIONS has not been previously submitted to any other university
for any other examination. I also declare that all information in this project has been obtained by and presented in
TABLE OF CONTENTS
TABLE OF CASES…………………………………………………………………………………….i
INTRODUCTION……………………………………………………………………………………1-2
RESEARCH METHEDOLOGY……………………………………………………………………….3
2.1 PROHIBITION…………........................................................................................................9
2.2. EXCLUSIONS……………………………………………………………………………..11
2.3. SANCTIONS……………………………………………………………………………….11
3.3. OFFENCES…………………………………………………………………………………15
CONCLUSION…………………………………………………………………………………………18
BIBLOGRAPHY……………………………………………………………………………………….19
TABLE OF CASES
Hoffmann-La Roche & Co. AG v Commission of the European Communities....…..[2002] CAT 1
AKZO Chemie BV vs Commission………………………………………………….[1991] ECR 1- 3359
1
A DISCUSSION OF THE COMPETITION LAW
IN THE UK- ASSUMPTIONS, PRESUMPTIONS AND
IMPLICATIONS
By Yesha Parikh
INTRODUCTION
The law aims to promote healthy competition. It bans anticompetitive agreements between firms such as
agreements to fix prices or to carve up markets, and it makes it illegal for businesses to abuse a dominant
market position. There are heavy penalties for infringements. Offenders can be fined, disqualified from being a
director and, in some cases, sent to prison. Under competition law, mergers between businesses can also be
prevented if they might reduce competition, and uncompetitive markets can be investigated through market
studies.1
Defined broadly, competition law has occupied a place in the corpus of English law for many centuries.
Modern statutory competition policy first emerged in the aftermath of the Second World War, developing
somewhat haphazardly thereafter. From today’s view, this policy was tentative, partial, and under-enforced.
There were in the United Kingdom four distinct legal regimes that were concerned with monopolistic or
anticompetitive situations and conduct. These four regimes were:
(iii) the restrictive trade practices and resale price maintenance legislation
Each of those regimes had its own more or less complex rules and each regime covered a range of different
situations. There was some overlapping in the application of the rules as between one regime and another; but
the rules, the concepts underlying them and the applicable procedures were wholly different as between the
different regimes.
1
https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/284428/oft911.pdf
2
https://www.econstor.eu/bitstream/10419/51159/1/301152780.pdf
The United Kingdom joined the European Community (EC) with the European Community Act 1972, and
through that became subject to EC competition law. Since the Maastricht Treaty of 1992, the EC was renamed
the European Union (EU). The United Kingdom acceded to the European Communities on 1st January 1973.
The EC rules on competition then became of direct effect in the United Kingdom, notably Articles 81 and 82 of
the European Economic Community Treaty, as it was then called, which took effect in addition to national
competition law, and Articles 65 and 66 of the European Coal and Steel Community Treaty, which, so far as
coal and steel Treaty products were concerned, took effect to the exclusion of national competition law.3
By the late 1980s it was widely recognised that, in consequence, the law was in a most unsatisfactory state,
particularly because competition law should be reasonably understandable by businessmen whose conduct it is
intended to regulate.
(1) The Competition Act 1998 and (2) The Enterprise Act 2002
The Act goes a long way towards bringing UK competition law into line with European Community
competition law and increasingly along the same lines as parallel rules of EC law.
3
https://en.wikipedia.org/wiki/United_Kingdom_competition_law
RESEARCH METHEDOLOGY
This study is a doctrinal Study, which is based on the information available, firstly, from the different websites
and secondly, the information available in different books on the subject. Care has been taken rely on the data
available from the reliable sources and presenting them in a simple form with the help of charts and tables.
RESEARCH QUESTIONS
NOT?
NOT?
COMPETITION LAW?
4
CHAPTER 1: UNITED KINGDOM’S COMPETITION LAW
The 1998 Competition Act sets out two key prohibitions against anti-competitive agreements and cartels, and
abuse of dominance ,known as the Chapter I and Chapter II , prohibitions respectively. This has greatly
expanded the scope for the competition authorities to intervene to prevent anti-competitive behaviour. The 1998
Act also gave the authorities greater teeth in the form of the powers to impose penalties of up to 10 percent of
turnover and new powers of investigation. It repeals the Restrictive Trade Practice Act and the legislation that
created the concept of anti-competitive practice; and it also repeals the specific legislation relating to resale
price maintenance. It creates a new Competition Commission which will have two distinct components: (i)
monopoly and merger commission (ii) appeal tribunal
The 2002 Enterprise Act updated two other aspects of the UK Competition regime: merger control and market
investigation. On 15 March 2012 the UK Government's Department for Business, Innovation and Skills (BIS)
announced proposals for strengthening competition in the UK by merging the Office of Fair Trading and the
Competition Commission to create a new single Competition and Markets Authority (CMA). The formation of
the CMA was enacted in Part 3 of the Enterprise and Regulatory Reform Act 2013, (ERRA)which received
royal assent on 25 April 20134.
CHAPTER I: PROHIBITION
This chapter includes collusion by competitors on consumers, markets, prices or output. This chapter is in line
with article 815 of the EC treaty and Article 1016 of TFEU.
4
https://en.wikipedia.org/wiki/Competition_and_Markets_Authority
5
Article 81 of the EC Treaty Article 81 (1)of what is now the European Community Treaty prohibits agreements and concerted
practices between undertakings and decisions of associations of undertakings that have as their object or effect the prevention,
restriction or distortion of competition within the Common Market and that may affect trade between Member States. Article 81 (2)
provides that such agreements shall be automatically void. Article 81 (3) provides for the possibility of exemption from the
prohibition contained in Article 81 (1) if certain specified conditions are fulfilled. The prohibition contained in Article 81 (1) does not
apply to an agreement that does not appreciably affect competition and trade between Member States either because of the economic
insignificance of the agreement and of any network of agreements of which it forms part or because of the application of a still ill-
defined rule of reason.
6
1. The following shall be prohibited as incompatible with the internal market: all agreements between undertakings, decisions by
associations of undertakings and concerted practices which may affect trade between Member States and which have as their object or
effect the prevention, restriction or distortion of competition within the internal market, and in particular those which:
(a) directly or indirectly fix purchase or selling prices or any other trading conditions;
(d) apply dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive
disadvantage;
5
Section 2 of the Competition Act 1998, prohibits any agreements or cartels between Member States that could
disrupt free competition within the internal market.
ESSENTIALS OF SECTION 2
Chapter I prohibition covers not only formal written agreements but also other kinds of informal agreements or
understandings, whether oral or written. It also applies to the decisions of trade associations and regulations that
may limit members’ freedom of action.
Concerted practices are sometimes found in market where few undertakings are present. For example, a system
of advanced price announcements where there is an understanding that other market players will make their
own pricing accordingly, may be prohibited.
2. UNDERTAKINGS
(e) make the conclusion of contracts subject to acceptance by the other parties of supplementary obligations which, by their nature or
according to commercial usage, have no connection with the subject of such contracts.
2. Any agreements or decisions prohibited pursuant to this Article shall be automatically void.
3. The provisions of paragraph 1 may, however, be declared inapplicable in the case of:
which contributes to improving the production or distribution of goods or to promoting technical or economic progress, while
allowing consumers a fair share of the resulting benefit, and which does not:
(a) impose on the undertakings concerned restrictions which are not indispensable to the attainment of these objectives;
(b) afford such undertakings the possibility of eliminating competition in respect of a substantial part of the products in question.
Undertakings includes natural or legal person engaged in economic activity irrespective of its legal status and
the way in which it is financed.
A parent company and its subsidiary or two companies having the same parent will normally be regarded as a
single undertaking, with agreements between them regarded as the mere allocation of functions within a single
group.
Whether an agreement restricts or distorts competition will depend on a careful analysis of the facts of each
individual case.
Chapter I prohibits:
Price fixing
Resale price maintenance
Exchange of price information
Collusive tendering
Market sharing
Anti-competitive rules of trade associations
All such kind of agreements must have its object within the UK and such agreements are presumed to be void.
4. APPRECIABILITY
In determining whether the agreement has an appreciable effect on competition the CMA will have regard to
the Commission’s approach as set out in its notice on agreements of minor importance.
The notice specifies that an agreement will not have appreciable effect on competition if their combined market
share does not exceed 10%. The CMA will also consider factors such as the structure and characteristics of the
market affected.
EXCLUSIONS
The act provides for three broad categories of exclusions. The act allows:
The chapter I and II do not apply to mergers under the Enterprise Act nor to concentrations in respect of which
the Commission has exclusive jurisdiction under the EC Merger Regulation.
7
The act excludes agreements that are subject to competition scrutiny under the Broadcasting act or
Communications Act
2. GENERAL EXCLUSIONS
The chapter I or II prohibitions do not apply to an undertaking entrusted with the operation of services of
general economic interest or having a character of revenue-producing monopoly. This exclusion is based on
Article 106 of TFEU
The chapter I or II prohibitions do not apply to agreement to the extent to which it is made or engaged in to
comply with a legal requirement
Secretary of State have power to add additional exclusions or remove existing ones in order to avoid conflict
between provisions of competition act and international obligation of the UK or to serve the public interest.
3. SELF ASSESSMENT
It is not possible to notify an agreement to the CMA for exemption, but parties are expected to self-assess
whether an exemption is likely to be available or not. Individual assessment criteria may be unnecessary where
the agreement benefits from a block or parallel exemption.
4. BLOCK EXEMPTION
Restrictive agreements that fulfil the conditions of block exemption regulation are excluded from prohibition.
Current block exemption regulations cover notably research and development agreements, specialization
agreements, technology transfer agreements as well as distribution agreements more specifically in car sector7.
5. PARALLEL EXEMPTION
An agreement is exempt from the Chapter I prohibition if it is exempt from the European Union prohibition—
A parallel exemption (a)takes effect on the date on which the relevant exemption from the European Union
prohibition takes effect.
The CM may—
7
Section 6 of Competition Act,1998
(b)vary or remove any such condition or obligation;
Under the enterprise act, participation by an individual in a cartel is a criminal offence. Cartel means, and
arrangement between at least two persons that undertakings will engage in price fixing, limiting supply or
production, market sharing or bid rigging.
The cartel offence may be punished on conviction up to five years imprisonment or to an unlimited fine or both.
On summary conviction the cartel offence is punishable by imprisonment for a maximum term of six months or
to a fine not exceeding the statutory maximum (currently set as unlimited)9.
Individuals can also be prosecuted for attempt to commit cartel offence or for conspiracy to commit the cartel
offence.
The CMA’s power of investigation and prosecution in respect of the criminal offence under the Enterprise Act
are shared with the Serious Fraud Office (SFO). The SFO is intended prosecutor for the cartel offence in
England, Wales and Northern Ireland.
The exclusions include where customers are notified of the potentially anti-competitive arrangements before
they enter into supply agreements for the affected products or services and where relevant information about the
arrangements is published in the London Gazette before they are implemented.
The first ever conviction for cartel offences under the enterprise act were made in June 2008 in relation to the
global marine hose cartel. Three company directors were sentenced to imprisonment for two and half years. The
defendants had pleaded guilty to dishonestly agreeing to allocate markets and customers, restrict supplies and
fix prices relating to the supply of marine hoses and ancillary equipment in UK.
The ‘Chapter 2 prohibition’ applies to abuses by an undertaking which is dominant in a market in the UK.
Section 18 of the 1998 Act contained in the Chapter II prohibition on abuse of a dominant position is equivalent
to Article 8210 of EC Treaty and Article 10211 of TFEU.
ESSETIALS OF SECTION 18
Dominance
Abuse
Effect on trade within UK
1. DOMINANCE
A determination of dominant position may depend on how crucially the relevant market is defined. This must
considered through as assessment of:
Dominance within the market will depend on examination of the conditions within the relevant market,
including factors such as market shares, the position of competitors, barriers to entry and the bargaining
strength of customers. As a thumb rule, dominance will not generally be considered to exist below market share
of 40%.
10
2. ABUSE
10
Article 82: Any abuse by one or more undertakings of a dominant position within the common market or in a substantial part of it
shall be prohibited as incompatible with the common market insofar as it may affect trade between Member States.
Such abuse may, in particular, consist in:
(a) directly or indirectly imposing unfair purchase or selling prices or other unfair trading conditions;
(b) limiting production, markets or technical development to the prejudice of consumers;
(c) applying dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive
disadvantage;
(d) making the conclusion of contracts subject to acceptance by the other parties of supplementary obligations which, by their
nature or according to commercial usage, have no connection with the subject of such contracts.
11
Article 102(ex Article 82 TEC)
Any abuse by one or more undertakings of a dominant position within the internal market or in a substantial part of it shall be
prohibited as incompatible with the internal market in so far as it may affect trade between Member States.
Such abuse may, in particular, consist in:
(a) directly or indirectly imposing unfair purchase or selling prices or other unfair trading conditions;
(b) limiting production, markets or technical development to the prejudice of consumers;
(c) applying dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive
disadvantage;
(d) making the conclusion of contracts subject to acceptance by the other parties of supplementary obligations which, by their
nature or according to commercial usage, have no connection with the subject of such contracts
The concept of abuse is broad: any conduct by dominant company which allows it to enhance its market
position to the determinant of competitors or consumers may be considered abusive.
(a) directly or indirectly imposing unfair purchase or selling prices or other unfair trading conditions;
(c) applying dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a
competitive disadvantage;
(d) making the conclusion of contracts subject to acceptance by the other parties of supplementary obligations
which, by their nature or according to commercial usage, have no connection with the subject of such contracts
In Hoffmann-La Roche & Co. AG v Commission of the European Communities, it was observed that, “The
concept of abuse is an objective concept relating to the behaviour of an undertaking in a dominant position
which is such as to influence the structure of a market where , as a result of the very presence of the
undertaking in question , the degree of competition is weakened and which , through recourse to methods
different from those which condition normal competition in products or services on the basis of the transactions
of commercial operators , has the effect of hindering the maintenance of the degree of competition still existing
in the market or the growth of that competition”12.
It is not required that the abuse occurs in UK market. It is sufficient that the undertaking committing the abuse
of dominant position is in relation to UK market and that the conduct may produce effects on trade in the UK or
part of the UK
In AKZO Chemie BV vs Commission13 wherein the applicants, the Dutch Company and its UK subsidiary were
found to have pursued a course of conduct intending to damage a competitor and to force him out of the market.
The ECJ concluded that the dominant firm had engaged in predatory pricing as they were charging below the
average variable cost and that there were signs of recouping the losses by the dominant firm and that occupies
an important place in the whole idea of predatory pricing.
11
2.2. EXCLUSIONS
2.3. SANCTIONS
Companies liable under Chapter II may face fine up to a maximum level of 10% of worldwide turnover.
Individuals within a company associated with the infringement may be disqualified from serving as a director
of UK company for period of up to 15 years.
12
The CMA has the power to use several forms of investigation for breaches of the Chapter I and II prohibitions.
Following powers are available to CMA:
For the purposes of an investigation under section 25, the CMA may require any person to produce to it a
specified document, or to provide it with specified information, which it considers relates to any matter relevant
to the investigation. The power conferred by sub section is to be exercised by a notice in writing.
(a)the time and place at which any document is to be produced or any information is to be provided;
CMA’s power to require a person to produce a document includes power to require him, or any person who is a
present or past officer of his, or is or was at any time employed by him, to provide an explanation of the
document; and if the document is not produced, to require him to state, to the best of his knowledge and belief,
where it is15.
13
14
Section 25 of Competition Act,1998
15
Section 26 of Competition Act,1998
For the purposes of an investigation, the CMA may give notice to an individual who has a connection with a
relevant undertaking requiring the individual to answer questions with respect to any matter relevant to the
investigation—
The CMA must give a copy of the notice to each relevant undertaking with which the individual has a current
connection at the time the notice is given to the individual.
(b)an individual has a current connection with an undertaking if, at the time in question, he or she is so
concerned, is so employed or is so otherwise working16.
Any officer of the CMA who is authorised in writing by the CMA to do so (“an investigating officer”) may
enter any business premises in connection with an investigation. No investigating officer is to enter any
premises in the exercise of his powers under this section unless he has given to the occupier of the premises a
written notice which—
14
(a)if the CMA has a reasonable suspicion that the premises are, or have been, occupied by a party to an
agreement which it is investigating; or
16
Section 26A of Competition Act,1998
(b)if the investigating officer has taken all such steps as are reasonably practicable to give notice but has not
been able to do so.
An investigating officer entering any premises under this section may take with him such equipment as appears
to him to be necessary, require any person on the premises to produce or explain any document which he
considers relates to any matter relevant to the investigation, take copies of, or extracts from, any document
which is produced, require any information which is stored in any electronic form which the investigating
officer considers relates to any matter relevant to the investigation, to be produced in a form—
Officer may take any steps which appear to be necessary for the purpose of preserving or preventing
interference with any document which he considers relates to any matter relevant to the investigation17.
On an application made to it by the CMA, the court or the Tribunal may issue a warrant if it is satisfied that—
(a)there are reasonable grounds for suspecting that there are on any business premises documents the
production of which has been required under section 26 or 27; and which have not been produced as required;
is on the premises
(b)there are reasonable grounds for suspecting that there are on any business premises documents which the
CMA has power under section 26 to require to be produced; and they would not be produced but would be
concealed, removed, tampered with or destroyed; or
(c)an investigating officer has attempted to enter premises in the exercise of his powers under section 27 but has
been unable to do so and that there are reasonable grounds for suspecting that there are on the premises
documents the production of which could have been required under that section.
Any person entering premises by virtue of a warrant under this section may take with him such equipment as
appears to him to be necessary.
A warrant under this section continues in force until the end of the period of one month beginning with the day
on which it is issued. Any document of which possession is taken may be retained for a period of three
months18.
15
17
Section 27 of Competition Act,1998
18
Section 28 of Competition Act,1998
The requirement to produce documents under this part does not extend to documents protected by legal
professional privilege. “Privileged communication” means a communication—
(b)confidential communication made in connection with, legal proceedings and for the purposes of those
proceedings, which in proceedings in the High Court would be protected from disclosure on grounds of legal
professional privilege19.
In the case of dispute over whether documents are privileged or not, the investigating officer attempt to resolve
the dispute by way of a discussion.
3.3. OFFENCES
There are civil and criminal sanctions for non-compliance with powers of investigation under the competition
act. The offences fall into four main categories:
The CMA’s enforcement powers as stated from Section 32 to Section 40 of Competition Act, 1998 are:
(c) To give a direction to the undertaking concerned to modify or terminate the agreement or to modify or cease
the abusive conduct;
(e) to apply for a disqualification order to be made against a company director for a period of up to 15 years
16
The burden of proving an infringement lies with the CMA. The burden of proving that exemption is available
lies upon the party making that claim.
19
Section 30 of Competition Act,1998
20
Section 42,43 and 44 of Competition Act,1998
APPEALS
Any party to an agreement in respect of which the CMA has made a decision may appeal to the Competition
Appeal Tribunal (CAT) against, or with respect to, the decision.
Whether the response of the CMA to a complaint against its decision to close an investigation without reaching
a formal infringement or non-infringement decision can be appealed or not has been the subject of important
litigation under the competition Act. The CAT has clarified as follows:
Where CMA does not reach a view as to the merits of the case and closes investigation for some reason
then the complainant’s only right of recourse will be an application for judicial review.
Where the CMA closes its file on a complaint or elects not to pursue a complaint on the basis that there
is no evidence then it has reached a decision which is appealable.
The decisions of the CAT must be reasoned and published. There is a further right of appeal from decisions of
CAT either on a point of law or as to the amount of penalty to the court of Appeal. Further appeal lies to the
Supreme Court21.
A third party or representative body showing a sufficient interest in a decision of the FCMA under the
Competition Act may also appeal that decision to the CAT. The CAT determines the question of ‘sufficient
interest’. Such appeals by third party must be made within two months of the notification or publication of the
decision.
17
21
https://onlinelibrary.wiley.com/doi/pdf/10.1087/09531519950145689
United Kingdom competition law is affected by both British and European elements. The European Economic
Community was established by the Treaty of Rome in 1957. The United Kingdom joined the European
Community (EC) with the European Community Act 1972, and through that became subject to EC Competition
law. So where a British company is carrying out unfair business practices, is involved in a cartel or is
attempting to merge in a way which would disrupt competition across UK borders, the Commission of the
European Union will have enforcement powers and exclusively EU law will apply 22. Whereas practice of
business within UK, will be dealt by National Law. However the national law should be in line with EU law.
Hence there is concurrent jurisdiction. National courts play a key role in the enforcement of European
competition policy.
18
CONCLUSION
22
Austria , Belgium, Denmark , Estonia, Finland , France , Germany, Italy , Greec e , Netherlands, Poland, Portugal , Spain, Sweden ,
and the United Kingdom etc are the members of EU
Thus it can be seen that UK competition law have developed gradually over the time and is now having a
codified Competition law which can be interpreted harmoniously with EU law. The main aim of the UK
competition law is to protect the consumers. Now as UK has proposed its exit from EU, it will be interesting to
see how the competition law will be effected after BREXIT on 31st October 2019.
19
BIBLOGRAPHY
Competition Law, By Richard Whish, David Bailey, Oxford University Press, 8th Edition,2014
EU Competition Law: Text, Cases, and Materials By Alison Jones, Brenda Sufrin, Oxford University
Press, 6th Edition,2016
EU competition law and intellectual property rights, the regulation of innovation, Schmidt,
Hedvig and Anderman, Steven 2nd edition , Oxford University Press, (2011)
EC and UK Competition Law: Commentary, Cases and Materials, By Maher M. Dabbah,
Cambridge University Press, 2004