The substantive and much anticipated reforms of competition law contained in the Enterprise Act 2002 come into force on 20 June 2003.
The Enterprise Act makes significant changes to competition law, to the enforcement of consumer regulations, to insolvency law and to the structure, procedures and activities of the Office of Fair Trading, the Competition Commission and the Competition Appeal Tribunal. The organisational changes came into effect in April 2003.
John Vickers, Chairman of the OFT said: "The Enterprise Act coming into force is a major milestone in the development of competition and consumer law. The Act, building on previous legislation, creates a clearer and sharper framework for markets and enterprise. Markets that work well are good for consumers and all the fair-dealing businesses that serve them well."
The key competition provisions of the Act are:
Mergers
A new test for mergers to be referred by the OFT to the Competition Commission (CC): a 'substantial lessening of competition' in a market in the UK. This replaces the public interest test under the Fair Trading Act. Revised investigation criteria (i) UK turnover of target company £70m or above (replaces assets test); or (ii) merger creates or enhances a 259% or greater market share in the UK (test unchanged).
It is the OFT, acting as an independent authority, which decides whether a merger will be referred to the Competition Commission for further investigation. The Secretary of State will only be involved where there are defined public interest issues, such as national security. She will, however, continue to take decisions on newspaper mergers until the reforms in the Communications Bill come into force.
Cartel offence
The Act introduces criminal penalties of fines and/or up to five years' imprisonment for individuals who dishonestly engage in the worst type of cartels, horizontal price-fixing, limitation of production or supply, market sharing or bid-rigging. The OFT receives strengthened powers of investigation including powers of surveillance. The SFO (in Scotland the Lord Advocate) will prosecute under the Act. Immunity from prosecution may be available to individuals who first inform the OFT of a cartel and who cooperate fully with the investigation.
Director disqualification
The OFT and other sector regulators gain power to apply to the court to disqualify a company director whose company has been shown to breach UK or EC competition law where the individual's behaviour contributed to the breach, either through direct action or because the director failed to take the kind of action that would be expected of a person in his position. Disqualification may be for up to 15 years.
'Super-complaints'
Designated consumer bodies can make a 'super-complaint' to the OFT or to an industry regulator where they believe a feature or combination of features of a market are significantly harming the interests of consumers. The OFT or regulator must publish a response within 90 calendar days of the complaint stating what it will do about the complaint and giving reasons.
Market investigation references
The OFT receives revised powers to investigate markets where the OFT finds reasonable grounds to suspect that a feature or combination of features of a market prevents, restricts or distorts competition. The Competition Commission may be asked to investigate in more depth. Before making a reference to the CC, the OFT will consult the main firms affected, sharing its reasoning and giving them an opportunity to respond. The Competition Commission may investigate the structure of the market concerned or the behaviour of persons supplying or purchasing goods which affect the operation of the market or the behaviour of customers.
Further information on the competition provisions of the Enterprise Act can be found by clicking here.
Alternatively, please refer to the OFT website.
