⚖️ Competition Law
The competition law ensures healthy competition
An 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 domainant market position.
You need to be aware of the main rules to avoid breaking the law or becoming a victim of other anti-competitive law practices. There are heavy penalties for infringements. Offenders can be fined and disqualified from being a director and in some cases, sent to prison. Under competition law, mergers between businesses can also help be prevented if they might reduce competition, and undercomplete markets can be investigated through market studies.
Anti-competitive agreements#
This is where two or more companies operating as competitors in the same market agree to co-operate by fixing prices or dividing up the market, which has the effect of reducing competition in their market.
Under UK law, if an agreement is made by a UK company affects trade solely within the UK, this will be governed by Chapter one in the Competition Act 1998
Abuse of dominant market position#
Abuse of anti competitive market position is the actions conducted by an organisation with the intent to adversely affect competitors and other organisations in the market.
Examples:
- Directly or indirectly imposing unfair purchase or selling prices or other unfair trading conditions.
- Limiting production, markets or technical deployment to the prejudice of the customer.
Penalties#
Firms involved in anti competitive behaviour may risk:
- Being fined up to 10% of their annual worldwide turnover. Individuals can also force personal fines and even prison sentences.
- You can be disqulified from acting as a company director - can last up to 15 years, seriously affecting your business options.
- You could be pursued for damages - Even if you avoid a fine or criminal charges, your customers could launch a civil claim for damages cases against you.
- Your business's reputation could be damaged
- You can spend years fighting legal cases
What office is responsible for this law?#
Old: Office of Fair Trading (OFT)
New: Competition and markets authority (CMA)
Who can they refer cases to in certain circumstances#
Refer it to the Competition Commssion for an in-depth inquiry.
Cartel#
Most serious form of anti-competitive behaviour. Agreements between businesses not to compete with each other.
Most serious cartel activities:
- Price Fixing
- Market Sharing
- Bid Rigging
- Agreements to limit production or supply