This article on ‘Competition laws in the UK: All you need to know‘ was written by Shraddha Pandey, an intern at Legal Upanishad.
The intention behind making these laws was to ensure fair competition between businesses, e.g. making rules to control internal politics. The legislation’s goal is to encourage a fair competitive environment. Its main objective is to make sure an equitable sector for both buyers and sellers by restricting corrupt behavior intended to expand its customer base than a truthful competitive pressure can obtain. In this article, we will focus on a complete overview of competition laws in the UK.
What is Competition law?
It is a representative body that prevents market failures resulting from anti-competitive corporate practices. Breaches carry stiff consequences. Perpetrators could be penalized, barred from becoming directors, and, in certain contexts, imprisoned. Anti-competitive practices have a wide-ranging effect and increase the difficulty for smaller businesses enrolling in the economy, and it has its side effects on consumers like a decline in creativity, poor services, and rising prices.
Competition Law in the UK
The competition laws in the UK are laid down in two major acts.
- The Enterprise Act, 2002
- The Competition Act, 1998
The Enterprise Act, 2002
The formation of commercial business cartels is prohibited by this act. A cartel is an organization of suppliers or manufacturers who band together to maintain high prices and intensity of rivalry low. Businesses within the monopoly market would not fight against one another. By either not reducing prices with competitive pricing, you will significantly raise your gross margin. All such regulations empower the Competitive Markets Authority (CMA) to examine infringements and initiate appropriate action.
The penalties can vary from substantial fines to the disqualification of companies and executives, as well as prison sentences. As a result, a lack of compliance with some of this legislation can have severe repercussions. It is imperative that companies, large and small, be aware of competition law and its implications, regardless of which market they do business in.
The Competition Act, 1998
The Competition Act restricts companies from performing the following things
- Maintaining a guaranteed amount is a contract for both parties i.e. who offer a sale and the one who accepts the sale of a product, customer support, or natural resource at a specific set rate. This would make it difficult for many other businesses to compete. Also, it deprives the general population of the advantages that come with the contest.
- Concede to limit production with companies in the same market to lessen contest.
- Let the marketplace unlock.
- Manufacturing is confined.
- It applies to every contract that creates monopolies. This directly influences major businesses as well as it influences the local small firms
- Rivals will be excluded from the market of a company. They are unable to reach an agreement as to who will make an offer about which deal. Consider, rather than trying to compete equitably, we take the said contract and you accept the deal.
Competition law affecting businesses in the UK
Companies benefit from competition law because it fosters a productive corporate structure and allows them to grow and improve to keep being major contenders in this field. It makes sure the organizations with a dominant position in the market do not exploit other businesses using the authority given to them. Competition law motivates companies to innovate while benefiting consumers who have a diverse range of products to pick from in a competitive market. As a result, companies must maintain strict adherence to competition law to keep the sector vibrant and beneficial.
Anti-competitive behavior involves contracts that are designed to reduce competitive environments for the advantage of the relevant parties. Contract terms could include, for example, production control, market share, price fixing, and collision. The company will be at a disadvantage if it does not participate in these anti-competitive agreements. As a result, regulatory authorities must impose competition laws to prevent organizations from participating in such anti-competitive behavior. Furthermore, if a company has a dominant market position, it would use that place to damage most other business contenders.
What are the actions taken for infringing laws?
The CMA has the power to investigate the company’s (and, in some cases, domestic) licensed premises, as well as to start taking duplicates of documentary evidence, digital records, e-mails, and, in some cases, to detain legal papers. This authority also has the potential to verify the property of a company or organization that is not being investigated but could contain data records for an inquiry into some other business, such as a supplier, customer, or competitor. These “dawn raids” can happen without warning. Furthermore, the CMA does have the authority to evaluate people with ties to the business owners under inquiry. During a dawn raid, such mandatory interviews may be required with little notice.
Civil and Criminal Penalties
The contravention of competition law in the UK has serious repercussions. In particular
- The Contracting party’s barriers which violate provisions of this act are illegal and void, which means they are unenforceable in court. If the void restrictions are so central to the advertising structure that their removal alters the significance of the contract, the entire contract may be invalid;
- The executives who have violated the competition laws could be disqualified from the executive position for a period that may extend up to fifteen years;
- External parties may also be able (and progressively deciding) to sue for losses if they’ve suffered losses as a consequence of any forbidden anti-competitive contracts or behavior under UK antitrust law;
- The UK regulatory agencies get the authority to levy large fines on corporations that violate antitrust laws (up to 10 % of their global gross income within UK competition laws);
- Rulings by regulatory agencies that a company has violated antitrust laws are indeed widely published, resulting in significant harm to the person’s performance;
- Failure to comply with CMA legal rules (such as to provide the information requested) may lead to penalties for business workers and businesses. Furthermore, obstructing an inquiry by the CMA may lead to criminal obligation (shall be punished by additional fines and/or confinement punishments for up to 24 months);
- A cartel conviction can be a confinement penalty that can last up to five years and/or an unliquidated penalty. It is a criminal offense in the United Kingdom for a participant to enter into contracts between competing companies to rig bids, set up price levels, stock prices, or consumers, or restrict manufacturing or delivery, relating to such provisions relating and defenses.
The Competition law in the UK encourages fair competition and helps startups to grow in the market and earn revenue. It also has regulations for those who use their dominant market position and abuse the start-ups. The OFT has its own set of rules and regulations it helps in maintaining surveys that help authorities to set up investigations against people who are misusing their position.
Competition law enforcement is very helpful for the UK government to control the market. It also helps in improving the creativity of the market. It provides consumers to choose between suppliers and distributors and also promotes healthy competition. It makes sure that if there is any violation then there is the proper remedy to the losses and if necessary penalizes the executives and management teams. It promotes a consumer helpline and also encourages people to complain if they see any misbehavior around them. Thus the competition law in the UK helps to maintain a fair market for anyone.
- “A Quick guide to competition and consumer protection laws that affect your business.” A journal by OFFICE OF FAIR TRADING (https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/284428/oft911.pdf)
- Article by Udita Prakash a student at UPES, Dehradun – Published on 13 September 2021
- “Enforcing competition laws in the UK: a critical overview” (https://blog.ipleaders.in/enforcing-competition-laws-uk-critical-overview/)
- “Overview of UK Competition law” (https://www.ashurst.com/en/news-and-insights/legal-updates/quickguide—overview-of-uk-competition-law/)
- About Us- Competition And Markets Authority – GOV.UK (https://www.gov.uk/government/organisations/competition-and-markets-authority/about)