The Competition Act 1998 received Royal Assent on the 9th November 1998, the main provisions of which came into force on the 1st March 2000. It is of major importance for British Companies and some of the reforms will have far reaching effects. Companies that have been able to get away with anti - competitive behaviour in the past are now at much greater risk of being caught. The Director General of Fair Trading now has greater powers to investigate breaches of the rules which can lead to fines of up to 10% of Turnover and possible criminal sanctions against individuals. The principle aim of the Act is to help businesses by ensuring that the Competition Laws of the E.C and the U.K are complementary. There are two prohibitions in the new Legislation:

1. Anti - competitive agreements, cartels, and other concerted practices will be prohibited.

2. Prohibition of abuse of a dominant position in the market.

In Summary therefore the following may be seen as a breach of the new Legislation:
Directly or indirectly fixing the purchase or selling price or any other trading conditions. Limiting or controlling production, markets, technical development or investment.
Share markets or sources of supply.
Applying dissimilar conditions to equivalent transactions with other trading parties, so putting them at a competitive advantage.
Make the conclusion of contracts subject to the acceptance by the other parties of separate obligations.


Compliance Under the New Act
The Competition Act 1998 replaced the Restrictive Trade Practices Act and introduced sweeping changes whereby an agreement or practice is considered according to its effects or intended effect upon competition. In summary therefore agreements or practices will be scrutinised as to their effect in the relevant market.

Exemptions
Individual or block exemptions from anti-competitive prohibitions and Companies will be able to apply for an individual exemption to the Director General of Fair Trading. However agreements will have to satisfy certain criteria before individual exemptions will be granted. This includes a contribution to:

Improving the production or distribution, or promoting technical or economic progress, while allowing consumers a fair share of the resulting benefits. But they must not impose on the party concerned restrictions which are indispensable to the attainment of those objectives or create the possibility of restricting or eliminating competition in respect of a large part of the products in question.

There are also block exemptions, which exempt certain categories of agreements and obviate the need to make a separate application to the Director General of Fair Trading.

The Monopolies and Mergers Commission has been replaced by a new Competition Commission and all decisions in relation to exemptions are appealed to that body.

Enforcement and Investigative Powers
Companies should be made very aware of the new powers of investigation in the Competition Act 1998. This includes powers of entry, search and inspection. It also includes the right to enter individual homes and vehicles in search of evidence, including entering without a Warrant, although in this case 48 hours notice must be given. Investigating officers are able to take copies of Documents and other data.

Fines and Penalties
Companies could face fines of up to 10% of turnover if found to be in breach of anti-competition legislation and individuals could face Criminal sanctions including imprisonment, if they obstruct investigators or fail to comply with the rules.

Summary
The Competition Act 1998 should not be ignored by companies and particularly small companies who in the past have made the assumption that EC Competition Law did not apply to them, perhaps because all their trading partners were British. It has been designed to prohibit the abuse of a dominant position in the U.K where it affects trade practices which may fall foul of the new legislation and includes imposing unfair purchasing or selling prices or refusing supplies to a trading party.

Our Advice to You
If you are entering into agreements with new partners either within the U.K or outside. obtain legal advice before making them and don't put your Company at risk.