Anaya Nolan
Competition law in the United Kingdom is designed to protect the consumer or smaller business from anti-competitive agreements or the abuse of dominant market positions. It is enforced by the Competition and Markets Authority (CMA) and is influenced by both British and European elements. The Competition Act 1998 and the Enterprise Act 2002 are the most important statutes for cases with a purely national dimension. The CMA investigates potentially anti-competitive or abusive practices on its own initiative or after receiving a complaint, with the power to impose fines and even criminal liability in some cases.
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What You'll Learn
History of UK competition law
The history of competition law in the UK is a long and complex one, with its roots dating back to ancient times. The earliest known example of a competition law can be found in the Lex Julia de Annona, enacted during the Roman Republic around 50 BC, which imposed heavy fines on those who interfered with the corn trade. Fast forward to medieval times, and monarchs used tariffs to stabilise prices and support local production.
The English law of restraint of trade, which prohibited agreements that went against public policy unless their reasonableness could be shown, is considered the direct predecessor to modern competition law. This can be seen in the case of Nordenfelt v Maxim, where a Swedish arm inventor promised not to compete with an American gun maker upon selling his business.
The formal study of "competition" began in the 18th century with works like Adam Smith's "The Wealth of Nations". The term "competition law" came into use in the late 19th century, with the first statutory provision in the UK being the Restrictive Trade Practices Act 1899.
After World War II, competition law gained renewed attention, particularly in Europe with its focus on monopolies and cartels. The UK's Monopolies and Restrictive Practices (Inquiry and Control) Act of 1948 established the Monopolies Commission to handle restrictive trade practices, which later became the Monopolies and Mergers Commission (MMC).
In 1972, the UK joined the European Community (EC) and became subject to its competition law. The Competition Act of 1998 and the Enterprise Act of 2002 became the primary statutes for national cases, with the former marking the start of the modern era of UK competition law. The Enterprise and Regulatory Reform Act of 2013 brought about significant changes, including the creation of the Competition and Markets Authority (CMA) as the UK's primary competition law agency.
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UK competition law enforcement
Competition law in the UK is concerned with agreements or practices that distort competition within a market to the detriment of the consumer. It aims to maintain a truly competitive market where consumers benefit from price competition, greater product development, improved product specifications, and better quality of service between competitors.
The Competition and Markets Authority (CMA) enforces competition law on behalf of the public in the UK. The CMA is a non-ministerial government department that promotes competitive markets and tackles unfair business practices. It merged with the Office of Fair Trading and the Competition Commission following the Enterprise and Regulatory Reform Act 2013. The CMA has a strong track record of enforcing competition law, particularly in the pharmaceutical sector and in relation to bid-rigging in public procurement.
The CMA's work is guided by three key strategic aims: first, to receive complaints from businesses affected by anti-competitive conduct; second, to ensure that its enforcement work does not prevent pro-competitive collaborations between competitors; and third, to promote economic growth through competition. The CMA has introduced an open-door policy, offering tailored informal guidance to businesses on how they can work together to boost the green economy and address climate change.
The CMA has a range of powers to enforce competition law, including imposing fines, disqualifying company directors involved in wrongdoing, and issuing court orders. The CMA has imposed penalties of around £600 million in the past decade. In addition to the CMA, specific "watchdog" agencies such as Ofgem, Ofcom, and Ofwat are responsible for overseeing the operation of specific markets.
Prior to Brexit, if the conduct of a business affected competition across borders, the European Commission had the power to enforce EU competition law. The Competition Act 1998 and the Enterprise Act 2002 are now the most important statutes for cases with a purely national dimension.
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Prohibited practices
Competition law in the UK is concerned with agreements or practices that may distort competition within a market, which is detrimental to consumers. The Competition and Markets Authority (CMA) enforces competition law on behalf of the public. The CMA has the power to impose fines on businesses that breach competition law.
- Agreements between competitors that prevent or restrict competition, such as price-fixing, aligning or coordinating price levels, price increases, discounts, or other related pricing actions.
- Agreements between non-competing companies, such as suppliers and customers, that prevent or restrict competition.
- Abusive practices by businesses with a dominant market position, such as exploiting their strong market power or acting without regard to customers, competitors, or suppliers.
- Mergers or acquisitions that may reduce competition.
- Collusive tendering by purchasers, where buyers agree to act together to force a particular outcome from a supplier, or boycott a supplier.
- Exchange of price-related information between competitors, which is likely to infringe competition law.
These prohibited practices are considered anti-competitive behaviour and can result in hefty fines and legal actions. Directors of companies that infringe UK competition law may be disqualified from acting as directors for up to 15 years. Businesses may also incur criminal liability, resulting in fines and/or prison sentences of up to two years if they obstruct an investigation by the CMA.
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Competition law and cartels
Competition law in the UK has evolved from the English law of restraint of trade, which prohibited agreements counter to public policy. The Competition and Markets Authority (CMA) currently enforces competition law in the UK, with consumer welfare and the public interest at its core.
Cartels are a key focus of competition law. A cartel is an arrangement between competing firms designed to limit or eliminate competition between them, with the aim of increasing prices and profits. Cartel-type collusion on pricing/fees is illegal and will almost always lead to significant fines and may also be a criminal offence in the UK. Price-fixing agreements are always illegal, regardless of their form or how informal they are. The exchange of price-related information between competitors is also likely to infringe competition law.
Other prohibited or risky practices between a business and its competitors include agreements to align or coordinate price levels, price increases, discounts, or terms and conditions. These are known as "horizontal issues" as they arise between businesses operating at the same level in the supply chain. Most horizontal infringements of competition law are considered "object" infringements, which are among the most serious forms of competition infringement.
Before Brexit, if the effect of a business's conduct would reach across borders, the European Commission had the power to enforce EU law. The first provision in this case is Article 101 TFEU, which deals with cartels and restrictive vertical agreements.
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Competition law and international trade
Competition law in the UK has been influenced by both British and European elements. The Competition Act 1998 and the Enterprise Act 2002 are the key statutes for cases that are purely national. However, prior to Brexit, if a business's conduct affected cross-border trade, the European Commission had the authority to intervene, and EU law would take precedence. This relationship is now governed by the Trade and Cooperation Agreement (TCA).
The English law of restraint of trade is the predecessor to modern competition law, and it continues to be relevant, albeit to a lesser extent due to the evolution of modern statutes. This law prohibited agreements that went against public policy unless a reasonable justification could be provided.
The development of competition law in the UK, and globally, has been heavily influenced by the American experience. The Sherman Act of 1890 and the Clayton Act of 1914 were passed in response to concerns about the threat of large businesses to government power. These acts targeted "trust" arrangements, or complex power-sharing schemes among groups of large companies. The American approach to competition policy was later imposed on Germany and Japan after World War II.
The surge in international trade and investment has impacted competition law and enforcement policies. For example, the rapid growth in cross-border activity has led to a significant increase in merger activity involving US and non-US firms. This has prompted discussions around the enforcement attitudes of agencies and courts, the measurement of market power, theories of anti-competitive effects, and the treatment of evidence of efficiencies.
While there have been adjustments to competition policies in response to global trade, the basic principles of competition policy in the US have remained relatively stable. This stability is also observed in the UK, where the Competition and Markets Authority enforces competition law with the primary objective of protecting consumer welfare and the public interest.
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Frequently asked questions
The main objective of competition law in the UK is to protect consumer welfare and the public interest.
Anti-competitive behaviour includes agreements or practices that restrict free trading and competition between business entities. This can include informal conversations or routine commercial agreements that cross the line.
The CMA is the competition authority in the UK that enforces competition law and issues guidance on anti-competitive and abusive practices. It investigates potential issues on its own initiative or after receiving a complaint and has broad investigative and enforcement powers.
The Competition Act 1998 and the Enterprise Act 2002 are the most important statutes for cases with a purely national dimension. Chapters I and II of the Competition Act 1998 contain the competition law.
Following Brexit, the UK and EU became two distinct regulatory, legal, and customs territories. Businesses should seek legal advice for cases that were in progress or related to factual matters before 1 January 2021 as transitional arrangements may apply.
