COMMERCIAL DISPUTE RESOLUTION AND LITIGATION

Competition Law, an overview

A funny thing happened to me on the way to the Forum…. Having settled behind my desk for the morning, nursing coffee after my long commute from the kitchen to the upstairs office, I received a call.

The caller needed advice on Competition Law. I said I was happy to assist. Having taken the details of the caller, I turned over a fresh page in my notebook and listened attentively to what I anticipated would be the facts of the case. The caller then outlined their plan for a charity fun run; which permissions were needed from the Local Authority, Local police and whether St John’s Ambulance would need to be on hand…

The penny slowly dropped… wrong type of ‘Competition’ law.

Competition, or Anti-Trust, Law is the legal intervention of the state into the operation of the market place to prohibit unfair trade practices.

I am going to limit my article to those aspects of Competition Law which affect the consumer market in the UK.

The CMA – Competition and Markets Authority

The public authority in the UK which regulates the conduct of actors in the market is the Competition and Markets Authority, the CMA.

The CMA has powers to:

  • protect consumers from unfair trading practices of commercial undertakings
  • take action to enforce fair trading and fine those who breach competition law
  • investigate entire sectors of the market
  • investigate mergers where there is a structural risk to the market

The Competition Act 1998

The main powers of the CMA, for the purposes of this article, are set out in the Competition Act 1998. Chapter One deals with firms or companies acting together to distort a relevant market. Chapter Two deals with larger companies whose market power is such that they can use that market power to distort the market. I am using ‘firms’ and ‘companies’ for the purposes of this article, but, in truth we are dealing with any organisation that carries out commercial activities. The word most often used in the context of the Competition Act 1998 is ‘undertaking’. It matters not. What we are dealing with is anything or anyone that carries out commercial activities in a market place.

The CMA has powers to investigate. It can arrive unannounced at an office. It has powers of entry and powers of seizure. These powers, taken together, are often referred to as ‘Dawn Raid’ powers. More prosaically, the CMA can demand production of documents and can seek a court order (with costs) compelling the production of documents.

The CMA can set out the parameters of the market it is investigating. It can set out what it feels is the geographical and product or service market and, within those boundaries, make its findings as to whether the undertakings concerned have breached competition law within that market.  By rigging how a relevant market is defined, even small undertakings can be caught within the CMAs net.

Examples of anti-competitive practices

  • Dividing territories
  • Exclusive dealing
  • Refusal to deal
  • Predatory pricing
  • Price fixing
  • Product tying

Fines

The CMA can impose fines of up to 10% of the top line turn-over of a company found to be in breach of the Act.

Some words of advice and gentle warning

Companies and other commercial undertakings should take note. The powers of the CMA to investigate and take action are considerable. I have advised many organisations who:

  • feel that they are too small to attract the attention of the CMA, and/or
  • feel that the action(s) they are taking are innocent and may even benefit consumers, and/or
  • feel that Competition Law really does not apply to them

If I may venture some opinions based on a decade of doing this and having studied the position at post-graduate level, I would give these words of warning:

  • most cases come to the attention of the CMA through whistle-blowers
  • if the CMA want to intervene, they will, and then they will make their investigations fit the requirements of the law

So if you think you are too small to notice, please take these words of warning to heart. I have dealt with many a case where a company, which is colluding with others to maintain prices, has broken ranks and reported the other participants to the CMA to take advantage of the CMA’s ability to spare whistle blowers from the larger fines imposed on the reported parties.

In short, be sure your commercial sins will find you out.

Jonathan Compton
LLB LLM Solicitor Barrister MCIArb

About the authors


about the author img

Jonathan Compton

Partner

Specialist in commercial disputes, banking and finance, regulatory and anti-trust/competition law.

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