The Competition Act 1998 (c. 41) is the current major source of

competition law Competition law is the field of law that promotes or seeks to maintain market competition by regulating anti-competitive conduct by companies. Competition law is implemented through public and private enforcement. It is also known as antitrust ...

in the

United Kingdom The United Kingdom of Great Britain and Northern Ireland, commonly known as the United Kingdom (UK) or Britain, is a country in Northwestern Europe, off the coast of European mainland, the continental mainland. It comprises England, Scotlan ...

, along with the

Enterprise Act 2002 The Enterprise Act 2002 (c. 40) is an act of the Parliament of the United Kingdom which made major changes to UK competition law with respect to mergers and also changed the law governing insolvency bankruptcy. It made cartels illegal with a ma ...

. The act provides an updated framework for identifying and dealing with restrictive business practices and abuse of a dominant market position. One of the main purposes of this act was to harmonise the UK with EU competition policy, with Chapter I and II of the act mirroring the content of Articles 81 and 82 of the

Treaty of Amsterdam The Treaty of Amsterdam, officially the Treaty of Amsterdam amending the Treaty on European Union, the Treaties establishing the European Communities and certain related acts, was signed on 2 October 1997, and entered into force on 1 May 1999; i ...

(formally Articles 85 and 86 of the

Treaty of Rome The Treaty of Rome, or EEC Treaty (officially the Treaty establishing the European Economic Community), brought about the creation of the European Economic Community (EEC), the best known of the European Communities (EC). The treaty was signe ...

).Note: Arts 81 & 81 have since been renumbered as Arts 101 & 102

Chapter I Prohibitions

Deals with restrictive practices engaged by companies operating within the UK that distort, restrict or prevent competition. These are, primarily in the form of horizontal agreements (agreements to collude between firms on the same level of the supply chain such as retailers or wholesalers). These agreements could be to limit output, collusively share information, fix prices, tender collectively and share markets out.

Competition and Markets Authority The Competition and Markets Authority (CMA) is the principal competition regulator in the United Kingdom. It is a non-ministerial government department in the United Kingdom, responsible for promoting competitive markets and tackling unfair beh ...

(CMA) is responsible for prosecuting such firms who engage in these activities, and are able to levy fines up to 10% of annual global turnover for every year in which a violation has taken place up to a maximum of 3 years. Exemptions from prohibition are available if the firm can demonstrate that these practices are in the interest of the consumer through increasing market efficiencies or advancing technical progress.

Chapter II Prohibitions

Chapter II deals with the abuse of a dominant position by a firm who uses practices such as

predatory pricing Predatory pricing, also known as price slashing, is a commercial pricing strategy which involves reducing the retail prices to a level lower than competitors to eliminate competition. Selling at lower prices than a competitor is known as underc ...

, excessive prices, refusal to supply, vertical restraints and

price discrimination Price discrimination (differential pricing, equity pricing, preferential pricing, dual pricing, tiered pricing, and surveillance pricing) is a Microeconomics, microeconomic Pricing strategies, pricing strategy where identical or largely similar g ...

to maximise profit, gain competitive advantage or otherwise restrict competition. In investigating alleged breaches of Chapter II a two-stage process is involved. Firstly it must be identified if the firm possesses a dominant market position. This can be done through various concentration indices such as the Herfindahl-Hirchman Index (HHI). Generally, if a firm is found to have a market share over 40% then it is considered a threat to competition. There are no exemptions to chapter II as by its very definition as "abuse" of a market position, one must be guilty of wrongdoing for the chapter to apply. An example of the effects of the act is that in 2004, public schools were investigated for fee-fixing by the

Office of Fair Trading The Office of Fair Trading (OFT) was a non-ministerial government department of the United Kingdom, established by the Fair Trading Act 1973, which enforced both consumer protection and competition law, acting as the United Kingdom's economi ...

, and in 2005 fifty of the leading schools (including Ampleforth, Eton, Charterhouse, Gresham's, Harrow, Haileybury, Marlborough, Rugby,

Sevenoaks Sevenoaks is a town in Kent with a population of 29,506, situated south-east of London, England. Also classified as a civil parishes in England, civil parish, Sevenoaks is served by a commuter South Eastern Main Line, main line railway into Lo ...

Shrewsbury Shrewsbury ( , ) is a market town and civil parish in Shropshire (district), Shropshire, England. It is sited on the River Severn, northwest of Wolverhampton, west of Telford, southeast of Wrexham and north of Hereford. At the 2021 United ...

, Stowe,

Wellington Wellington is the capital city of New Zealand. It is located at the south-western tip of the North Island, between Cook Strait and the Remutaka Range. Wellington is the third-largest city in New Zealand (second largest in the North Island ...

and

Winchester Winchester (, ) is a City status in the United Kingdom, cathedral city in Hampshire, England. The city lies at the heart of the wider City of Winchester, a local government Districts of England, district, at the western end of the South Downs N ...

) were ordered to raise £3 million between them to be spent on charities nominated by the pupils of the schools involved in the years 2001–2003, and were banned from further sharing of information on their external fees.

References

External links

* {{UK legislation United Kingdom Acts of Parliament 1998 United Kingdom competition law