Competition Act a winner but needs to be streamlined

Published on Sunday 20 June 2010 23:28

IT IS now ten years since the UK Competition Act came into effect, introducing new powers and institutions to handle the challenges of anti-trust.

Earlier this month the Scottish Competition Law Forum (SCLF) hosted an event at Glasgow University to look at the UK competition law regime a decade on.

Critical discussion concluded progress had been reasonably successful and had earned international respect. However, there was consensus further evolution was needed, with businesses, consumers, economists, legal practitioners and the competition authorities themselves agreeing there was scope to further streamline the processes and demonstrate the benefits of this complex area of law.

The UK Competition Act prohibited anti-competitive agreements such as price fixing and market sharing and abuses of dominance such as product tying and refusal to supply, except where specific exemptions are applied.

Subsequent innovation in the Enterprise Act 2002 brought further reform in the UK system for dealing with mergers and markets, which aims to ensure the structure of a market itself supports competition among participants.

Ministers were largely removed from the process and decision making powers given to politically-independent competition authorities – the Office of Fair Trading (OFT), sectoral regulators such as Ofwat, Ofcom and Ofgem, and the Competition Commission – with a specialist Competition Appeal Tribunal to allow for their decisions to be challenged.

Sitting alongside EU powers and the arrangements for free movement, state aid and the complementary provisions of consumer law, the competition regime is designed to drive innovation and productivity.

Tracking the direct effect through the economy is hard and numbers of cases is not in itself a strong indicator of impact. The OFT's own estimates suggest 78 million of consumer benefits arose directly from competition enforcement in 2008-9.

While "blockbuster cases" such as an extensive construction cartel, or the high fines and publicity attaching to BA/Virgin price fixing were thought to have contributed to a much enhanced culture of business compliance, especially among larger firms, there was support for a continuing stream of smaller cases to demonstrate competition law disciplines are relevant for all.

On deterrence, a report by Deloitte shows the sanctions companies consider most important are criminal penalties, fines, disqualification of directors, adverse publicity and private damages actions.

At the SCLF event, the chairs of the expert panels, Sir David Edward and Professor Richard Whish, highlighted the challenges for the regime, and for the courts, in bringing together criminal and civil sanctions that could be seen as "tectonic plates" in the competition world. They pointed to difficulties that must be overcome where civil investigations against companies overlap with criminal prosecutions and possible jail sentences for directors or employees.

Businesses and consumers are the "customers" of competition and their reflections not surprisingly pull in opposing directions. While the business lobby may be concerned with streamlining and less complexity, consumer groups are concerned to ensure consumers have more direct input rather than proxy representation by public bodies. Some also question how well aware consumers were of the significance of the competition regime in promoting their interests. All participants at the event agreed with EC Competition Commissioner Almunia's recent observation that "competition policy is a tool at the service of consumers".

Yet there are major questions still to explore about the relevance of the "rational consumer", how far arrangements need to go to save consumers from themselves and when competition law is the most appropriate instrument to pick out of the regulatory tool box.

The regime is still young and developing rapidly. And it stands to make as crucial a contribution to the success of the Scottish economy as it does for the rest of the UK.

An energetic group of experts based in Scotland is contributing to its successful future and all are very welcome to engage in the discussion with the Scottish Competition Law Forum. There will be no shortage of issues to take up in future debates.

&#149 Gordon Downie is a partner at Shepherd and Wedderburn and a co-convener of the Scottish Competition Law Forum