The Enterprise Bill - Proposals for Reform of the UK Competition Regime

The Enterprise Bill was introduced in the House of Commons on 26th March 2002 and proposes wide-ranging changes to UK competition laws, together with measures to reform bankruptcy laws and consumer protection legislation. Changes to the current competition regime include the reform of the merger and monopoly regimes, the introduction of criminal sanctions for individuals engaging in cartel activity, a new category of complaint and new rights to bring claims for damages and for third parties to appeal decisions of the Office of Fair Trading.

Reform of merger control regime

The most significant proposals for changes to the current merger control regime proposed in the Bill are as follows:-

• Measures to remove some of the uncertainty currently caused by Ministerial involvement in merger control decisions: in most cases the final decision will be taken by the Office of Fair Trading and the Competition Commission, instead of by the Secretary of State.
• Competition authorities will in future consider whether a merger situation will give rise to a substantial lessening of competition, instead of assessing whether it may be contrary to the more wide-ranging (and less predictable) public interest test.
• The abolition of the part of the jurisdictional test based on the worldwide assets acquired and its replacement with a test based on UK turnover (the part of the jurisdictional test based on share of supply would remain).

The Bill proposes the replacement of the monopoly regime set out in the Fair Trading Act 1973 with a new regime for investigating markets where it appears that any feature or combination of features of that market prevents, restricts or distorts competition in connection with the supply of goods or services in the UK or any part of it.

This is intended to provide for circumstances where there are no obvious infringements of the prohibitions contained in the Competition Act 1998 on anti-competitive agreements or abuse of a dominant position.

Important elements of the changes are similar to those behind the reforms to the merger control regime: the Competition Commission (instead of the Secretary of State) will have powers to accept undertakings to remedy any adverse effects identified in the course of an investigation, and to make orders where necessary, and markets will be assessed on the basis of a largely competition-based test (as opposed to a broad public interest test).

Criminal penalties for engaging in cartel activity

The Bill proposes that an individual will be liable to criminal prosecution if he “dishonestly agrees” with one or more others to engage in certain prohibited cartel activities. The activities that are specifically prohibited by the Bill are price-fixing, limiting of production or supply, market-sharing and bid-rigging.

An individual who acts in such a way will be liable whether or not he has authority to act on behalf of the undertaking for whom he purports to act at the time of the agreement, and whether or not the agreement is implemented.

These proposals are intended to operate alongside and supplement the civil sanctions (voidness of agreements and heavy fines) for infringements of the prohibitions on anti-competitive agreements and abuse of a dominant position included in the Competition Act 1998, and provisions in the Bill which allow the OFT to accept a disqualification undertaking from, or apply for disqualification of, a director involved in an infringements of competition law.

Super complaints

The Bill provides for a new class of “Super complaint”. Super complaints may be made by certain designated consumer bodies where they consider there to be market features that are “significantly harming” the interests of consumers. The Bill provides a set timetable for the consideration of such complaints by the Office of Fair Trading.

Competition Appeal Tribunal

The Bill provides for the establishment of the Competition Appeal Tribunal. As well as taking over the roles performed by the appeals tribunal of the Competition Commission, the Competition Appeal Tribunal will have a number of additional functions. In particular:-

• The Bill enables third parties with sufficient interest to make an appeal in respect of a decision of the Office of Fair Trading direct to the Competition Appeal Tribunal.
• The Bill enables persons who have suffered loss as a result of infringements of certain competition laws (namely the prohibitions on anti-competitive agreements and abuse of a dominant position in the EC Treaty and the Competition Act 1998) to bring claims for damages in the Competition Appeal Tribunal. Whilst the existing right to bring claims for damages in the courts will remain, it is thought that providing for the hearing of such claims by a specialist body is likely to increase the possibility of such claims being successful.
• The Bill enables a claim for damages to be made by a specified body on behalf of two or more individual consumers, provided that each consents and they have claims in respect of the same infringement of competition law.

© Herbert Smith 2002

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