What is competition law and anti-competitive behaviour?
Competition law is enacted for the purpose of promoting competition by regulating anti-competitive behaviours. Primary anti-competitive behaviours are;
1) Anti-competitive agreements and
2) Abuse of a dominant market position.
1) Anti-competitive agreements mean agreements of cooperation rather than competition between competitors operating in the same market. Typical examples of anti-competitive agreements are fixing the price of items and dividing up markets between competitors, which results in less competition in their market.
2) Abuse of dominance occurs when a dominant company engages in activities reducing competition in a market. These anti-competitive activities include using exclusive contracts to exclude competitors from the market, restricting essential supplies available to competitors, selling items below cost to make competitors leave the market, and so on.
Does the UK have competition law?
The UK has the Competition Act 1998. Chapter I of the Act prohibits anti-competitive agreements and Chapter II of the Act prohibits the abuse of a dominant market position. If either behaviour affects trade within the UK, UK competition law will be applied.
Is EU competition law still applied in the UK?
Since 1 January 2021, the UK and EU operate separate competition regimes. UK competition law applies to competition and trade within the UK, whereas the EU competition law applies to competition and trade within the EU. If a UK company is trading in the EU, EU law continues to be applied.
Even though the UK has its own competition regime, the UK competition law rules are essentially similar to the equivalent EU rules. The ideas underpinning EU and UK competition law prohibitions are globally accepted, and there is no expectation that the core UK competition rules will be amended differently from the EU. However, there could be scope for divergence in their application in the future.
Do UK companies have to consider EU competition law any more?
The short answer to this question is “No”. However, EU competition law continues to apply to UK companies when trading within the EU. Many UK companies therefore still need to take into account both UK and EU competition law.
What are the potential consequences of violating competition law?
Violation of competition law could result in companies being fined up to 10% of their annual turnover. Companies could also face civil claims for damages as a result of allegations made by affected parties.
Fines can potentially be levied against the company and its directors (or other relevant individuals). As an individual, directors can be disqualified from managing a company for up to 15 years and there is even a risk of being imprisoned for up to 5 years. Therefore it is advisable to train directors and employees to be aware of prohibited anti-competitive behaviours beforehand and reduce the risk of potential violations.
Who enforces competition law in the UK?
The Competition and Markets Authority (CMA) is the competition authority in the UK. CMA enforces UK competition law and investigates anti-competitive and abusive practices. It can start an investigation by either its own initiative or after receiving a complaint.
When does the CMA send a warning or advisory letter?
The CMA sends warning and advisory letters to 1) companies which are suspected of breaking competition law and/or 2) companies operating in at-risk markets.
Therefore if a warning or advisory letter from the CMA is received, it means the CMA has concerns that the company may be harming competition in their market sector. Most likely, the CMA gets information about a company’s anti-competitive behaviours from their intelligence sources including complaints, and information gained from the application of a leniency policy, which offers companies a reduction in fines, or even immunity as a result of the company providing full cooperation and evidence to the CMA investigation.
How can a company ensure it is compliant with competition law?
It is important to carry out a thorough review of the company’s business practices from a legal perspective to find out if it is at risk of infringement and to ensure it remains compliant.
How 3CS can help
For further help and advice about competition law or any other corporate or commercial legal matter, please get in touch with your usual 3CS contact.