The Competition Act 1998 is the current major source of competition law 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 Europe, off the north-western coast of the European mainland, continental mainland. It comprises England, Scotlan ...

, along with the

Enterprise Act 2002 The Enterprise Act 2002 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 maximum pri ...

. 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).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 competition regulator in United Kingdom. It is a non-ministerial government department in the United Kingdom, responsible for strengthening business competition and preventing and reducing anti-com ...

(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 is a pricing strategy, using the method of undercutting on a larger scale, where a dominant firm in an industry will deliberately reduce the prices of a product or service to loss-making levels in the short-term. The aim is th ...

, excessive prices, refusal to supply,

vertical restraints Vertical restraints are competition restrictions in agreements between firms or individuals at different levels of the production and distribution process. Vertical restraints are to be distinguished from so-called "horizontal restraints", which are ...

and

price discrimination Price discrimination is a microeconomic pricing strategy where identical or largely similar goods or services are sold at different prices by the same provider in different markets. Price discrimination is distinguished from product differe ...

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 actually 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 in excess of 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, and in 2005 fifty of the leading schools (including Ampleforth, Eton,

Charterhouse Charterhouse may refer to: * Charterhouse (monastery), of the Carthusian religious order Charterhouse may also refer to: Places * The Charterhouse, Coventry, a former monastery * Charterhouse School, an English public school in Surrey Londo ...

, 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 parish, Sevenoaks is served by a commuter main line railway into London. Sevenoaks is from Charing Cross, the traditio ...

, Shrewsbury,

Stowe Stowe may refer to: Places United Kingdom *Stowe, Buckinghamshire, a civil parish and former village **Stowe House **Stowe School * Stowe, Cornwall, in Kilkhampton parish * Stowe, Herefordshire, in the List of places in Herefordshire * Stowe, Linc ...

Wellington Wellington ( mi, Te Whanganui-a-Tara or ) 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 second-largest city in New Zealand by metr ...

and Winchester) 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