The Competition Act - What it Means for You

1. Chapter 1 Prohibition - this outlaws anti competitive agreements and practices (cartels, price fixing).

2. Chapter 2 Prohibition - this outlaws the abuse of a dominant position (i.e. a substantial company taking unfair advantage of its size or power to harm other businesses).

3. The Director of General Fair Trading ("DGFT") has the power to impose stiff penalties on breaches of either prohibition of up to 10% of the UK turnover of the offender for a maximum of three years.

4. There is a right to appeal against the decision of the DGFT to a newly established Competition Commission Tribunal.

5. Businesses have the right to raise actions for damages and/or make complaints to the Office of Fair Trading ("OFT") if they think that they are being harmed by other businesses' anti competitive practices.

6. If businesses are not sure that their agreements fall foul of the Act they can apply to OFT for clearance of the agreements or for guidance on whether or not their agreements would be likely to infringe it.

7. The DGFT gains tough far reaching powers of investigation (including powers to raid premises and seize documents).

The Act provides a tougher regulatory regime to create a competitive environment benefiting businesses and consumers alike. Secondly by mirroring the existing European Union Anti Trust Regime the burdens on businesses having to comply with two different sets of rules will be removed. The new law means that businesses will have to think very carefully about how their actions will affect competitors. Breaches of the Act can be written or unwritten, formal or informal and the Act covers all types of businesses from public companies to partnerships and the sole trader. Businesses should ensure that they are familiar with the Act and are not involved in the most common form of anti competitive conduct - fixing prices or sharing markets. Businesses should also work out their market shares in relation to their markets for products and other services. Generally the higher their market share the more likelihood the business will fall foul of the Act. The "Chapter 1" prohibition only applies to arrangements that have an appreciable effect on competition and an arrangement will not generally have such an effect if the parties' combined market share does not exceed 25% (although price fixing or market sharing by a business of any size will fall foul of this prohibition). As for the "Chapter 2" prohibition the focus here is on market share. There will not be a dominant position if market share is less than 40%. All businesses should set up compliance programmes so that directors and employees - particularly those engaged in marketing/sales - are aware of the provisions of the Act.