UK: Making the UK the Best Place in the World to do Business?- The New Enterprise Bill

Last Updated: 16 April 2002
Article by Andrew Farquharson

The Enterprise Bill and Government Policy:

  • On 26th March 2002, the Government introduced the Enterprise Bill (the "Bill") in the House of Commons. The stated aim of the Government is to make the UK the best place in the world to do business and it believes that the Bill will go some way towards achieving this objective.
  • The White Paper "Productivity in the UK: Enterprise and the Productivity Challenge", published in June 2001, set out the Government's intention to focus on enterprise and productivity as the cornerstone of its economic reforms in this Parliament. The specific measures in this Bill were foreshadowed by three White Papers: "Productivity and Enterprise: A World Class Competition Regime" (Cm 5233), "Productivity and Enterprise: Insolvency - A Second Chance" (Cm 5234) published in July 2001, and "Modern Markets: Confident Consumers" (Cm 4410), published in July 1999.
  • The Bill itself implements a pledge in the Government’s 2001 general election manifesto to give more independence to the competition authorities, to reform the bankruptcy laws and to tackle trading practices which are to the detriment of consumers.
  • In addition, the Bill aims to boost productivity by encouraging enterprise and competition. In addressing competition matters, the Government has tried to make the link between consumer interests and competition policy in the same way as it is understood in the USA. The Bill therefore considerably strengthens the powers of regulators both as regards their decision-making and sanctioning functions.

The contents of the Bill:

  • The Bill is very extensive, being divided into eleven parts with 269 clauses and some 26 schedules.
  • Part 1 establishes the Office of Fair Trading as a corporate entity (the "OFT"), sets out its general functions and provides for arrangements for making super-complaints to the OFT.
  • Part 2 establishes and makes provisions for proceedings before the Competition Appeal Tribunal (the "CAT").
  • Part 3 provides for a new merger regime, covering the definition of a qualifying merger, the duty of the OFT to make references to the Competition Commission (the "CC"); how references are determined; the procedures that relate to certain public interest cases and other special cases; powers of enforcement; undertakings and orders; and various supplementary matters, such as information and publicity requirements and powers to require information.

  • Part 4 makes provision for new market investigations arrangements. It sets out the power of the OFT and the Secretary of State to make references to the CC and how the CC should report on the references. It provides for particular arrangements to apply in public interest cases and also covers powers of enforcement.
  • Part 5 establishes the Competition Service and provides for rules of procedure for the CC.
  • Part 6 deals with the creation of a cartel offence.
  • Part 7 deals with a number of miscellaneous competition provisions, including powers to disqualify directors who engage in serious competition breaches.
  • Part 8 deals with new procedures for enforcing certain consumer legislation and miscellaneous related matters.
  • Part 9 provides for rules to govern the disclosure of certain consumer and competition information held by a public authority, covering the circumstances in which it is permissible to disclose the information and various related matters.
  • Part 10 changes insolvency law by providing for a new regime for company administration and restricting the future use of administrative receivership; abolishing Crown preference; establishing a new regime for the insolvency of individuals; and making changes to the operation of the Insolvency Services Account.
  • Part 11 deals with commencement etc.

Competition law reform- the main provisions of the Bill:

  • If enacted in its present form the Bill will radically overhaul the competition law regime in the United Kingdom by introducing the following reforms:

    • A new regime for mergers, with decisions taken in most cases by expert independent competition authorities against a competition-based test, rather than the current public interest test;
    • A new regime for investigating markets, which will replace the existing monopoly regime established by the Fair Trading Act 1973. Again, most decisions will be taken by independent competition authorities against a competition-based test rather than the current public interest test;
    • Criminal sanctions for individuals who engage in hard-core cartels, with a maximum penalty of five years in prison for those who participate in them;
    • A new power for courts to disqualify directors involved in breaches of competition law;
    • A new provision allowing persons harmed by a breach of competition law to bring claims for damages before a specialist competition body (the CAT);
    • An amendment to the 1998 Act providing third parties with a direct right of appeal to the CAT against decisions of the OFT or Directors General of the sector regulators;
    • Public authorities holding information obtained in connection with competition investigations carried out under a number of statutes will be allowed to disclose this information in certain circumstances; and
    • Consumer groups will be able to make "super-complaints" to the OFT which will have fixed deadlines in which to respond.

Consumer law reform- the main provisions of the Bill:

  • Reform of consumer law is also envisaged in the Bill, which includes:

    • Enabling the OFT to introduce a new regime for approving business-to- consumer Codes of Practice;
    • Requiring the OFT to respond in accordance with a set timescale to "super-complaints" from designated consumer bodies; and
    • Enabling the OFT to provide information, advice and educational materials.

Insolvency law reform- the main provisions of the Bill:

  • Lastly, the Bill proposes an overhaul of insolvency law.
  • In terms of corporate insolvency the Bill proposes the streamlining of the administration procedure and restricts the ability of lenders to appoint an administrative receiver to the holders of pre-existing floating charges.
  • Removal of the Crown's preferential rights in all insolvency cases and making provision to ensure unsecured creditors are major beneficiaries is also proposed.
  • In terms of the insolvency of individuals the Bill:

    • Provides for the automatic discharge of nearly all bankrupts after a maximum period of 12 months;

    • Reduces the number of restrictions that are automatically imposed on undischarged bankrupts; and

    • Provides for a court-based regime ("Bankruptcy Restrictions Orders") to be attached to those bankrupts whose conduct, before and during bankruptcy, the court has found to be culpable.

  • The Bill also enables reform of the Insolvency Service financial regime, in particular, facilitating the return to creditors of more of the income from monies held in the Insolvency Services Investment Account.

Conclusion:

As a result of the lengthy consultation period the new Enterprise Bill contains few surprises. However, the changes it will make will have significant ramifications for the conduct of business in the UK.

The content of this article does not constitute legal advice and should not be relied on in that way. Specific advice should be sought about your specific circumstances.

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