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What is Competition Law?

Compliance Knowledge Base | Competition Law

Posted by: Morgan Rennie Published: Mon, 10 Sep 2018 Last Reviewed: Mon, 10 Sep 2018
What is Competition Law?

Competition law has been established with the purpose of maintaining market competition by ensuring there is regulation of business conduct which could be considered anti-competitive. In the UK, companies are subject to the regulations stated in the Competition Act 1998 and the Enterprise Act 2002, and when anti-competitive behaviour extends to EU member states, UK companies will be subject to the Treaty on the Functioning of the European Union (TFEU). Competition law aims to ensure that businesses offer the best possible products to customers, due to the competition that exists within the market. As part of an organisation you should be well trained in the intricacies of competition law.

Competition Law

Competition law has established the precedent that, in a free market, businesses should be in competition with other businesses, in order to provide the best services at the best prices. As a result, the consumers will benefit from receiving a range of different services and price rates to choose from.

Competition law exists internationally; the United States refers to anti-trust law, whereas China and Russia refer to anti-monopoly law. The origin of these competition laws dates to the Roman Empire, when the business practice of governments, market traders and guilds were always monitored and scrutinised. This form of regulation has evolved into modern business practice.

What is Competition Law?

The Principles of Competition Law are:

1) Preventing the practice of agreements which could restrict free trading and competition between different organisations. Essentially, if an agreement is achieved between two businesses with the goal to distort competition, this will in turn affect trade in the UK and the EU, and is therefore considered to be unethical business conduct.

2) Preventing the abusive behaviour of an organisation which is dominating the market. This behaviour could include practices such as price gouging, predatory pricing and tying.

The UK and EU competition laws are invested within:

The Competition Act 1998

The Enterprise Act 2002

Chapters I and II of both the Competition Act 1998 and the Enterprise Act 2002 deal with the anti-competitive behaviour which might affect trade within the UK.

The agreements which are prohibited under Chapter I and Article 101 of the Competition Act 1998 and the Enterprise Act 2002 are as follows:

- Agreements which have the purpose to fix purchase, selling prices or trading conditions.

- Agreements which have the purpose to control the markets, production, technical development or investment.

- Agreements between organisations to share markets and supplies.

- Agreements which will place trading parties at a disadvantage through creating agreements that have dissimilar conditions to similar transactions.

If anti-competitive behaviour is conducted beyond the UK to the EU, the Treaty on the Functioning of the European Union deals with this in Articles 101 and 102.

What are the Consequences of not Complying with Competition Law?

If an organisation demonstrates a lack of compliance with competition law they will face potentially serious repercussions. The defiance of Chapter I and II of the Competition Act 1998 and the Enterprise Act 2002 could inflict the following penalties upon an organisation:

- An organisation could be subject to the fine of 10% of the global turnover for breaching Chapter 1 or Article 101.

- If there are provisions within certain agreements which breach Chapter 1 or Article 101, these agreements will be deemed unenforceable and there is the potential to render the entire agreement unenforceable.

- If an organisation has breached Chapter 1 or Article 101, they will face potential actions from customers and competitors who believe that they have been directly affected by the organisation's anti-competitive behaviour.

- With reference to an individual within an organisation, there is potential for an individual to be disqualified from being a company director and to be subject to criminal sanctions.

Competition law is considered of utmost importance within the market and therefore for organisations across the UK and the EU, it is a legislative requirement to comply with this law. Essential training and understanding of this law are beneficial to an organisation as a whole.

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