The Competition Act 1998

The main provisions of the Competition Act are modelled very closely on EC Competition Law in the form of Articles 81 and 82 of the EC Treaty.

The Chapter I prohibition is almost identical in its wording to Article 81 of the EC Treaty. The main difference is that the Act refers to 'the UK' where Article 81 refers to 'the common market' or 'Member States'. Like Article 81, the prohibition applies to all arrangements, whether or not they are in writing. Similar to Article 81, the Act lists specific types of agreements, which are caught by the prohibition.

Agreements which do not have appreciable effect on competition will not be covered by the Chapter I prohibition. It seems that an agreement is unlikely to have an appreciable effect on competition where the combined market share of the parties is not more than 25%. However, the precise rules will be fixed by law. The Act provides for three types of exemption from the Chapter I prohibition:

• Individual exemption
• Block exemption
• Parallel exemption: this applies where an agreement is covered by an EC individual or block exemption under Article 81(3) of the EC Treaty, or would be covered by an EC block exemption if the agreement had an effect on trade between Member States of the EU

The Chapter II prohibition is almost identical in its wording to Article 82 of the EC Treaty. It covers the abuse by one or more companies of a dominant position in the relevant market. Generally, a company is unlikely to be considered dominant if it has a market share of less than 40%. However, as in EC law, other factors will also be relevant when assessing dominance. Like Article 82, the Act gives specific examples of types of conduct that are likely to be considered an abuse. Compared to the position under Article 82, there are no exemptions from the Chapter II prohibition.

It is intended that most agreements between parties at different levels of the marketing chain ('vertical agreements') will receive special treatment under the Act so that the Chapter I prohibition will not apply. This special treatment will not, however, apply to vertical agreements to fix prices.

The Director General has wide-ranging investigative powers under the Act. These include the power to enter premises and to require the production of documents that they consider relevant to the investigation.

An agreement which breaks English competition law may be cancelled or changed by order of the Director General. Any offending conduct may also be ordered to stop. In addition, the Director General has the power to order a company to refrain from engaging in suspected illegal activity while the matter is investigated. Infringing company may be fined up to 10% of their UK turnover.