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What is the Competition Act 1998?

Compliance Knowledge Base | Competition Law

Posted by: Morgan Rennie Published: Mon, 10 Sep 2018 Last Reviewed: Mon, 10 Sep 2018
What is the Competition Act 1998?

The Competition Act 1998 is a complementary piece of legislation to the Enterprise Act 2002, created with the concerted effort to enforce competition law across the UK. The Competition Act 1998 defines the anti-competitive conduct that is not permitted within the UK markets and subsequently states what the respective consequences for these anti-competitive offences will be. As an organisation conducting business within the UK, knowledge and training on the Competition Act 1998 is essential.

What is the purpose of the Competition Act 1998?

The Competition Act was created in order to harmonise UK and EU policy on competition law, effectively establishing a concerted effort to prevent anti-competitive practice from continuing. Chapter I and Chapter II of the Competition Act reflect the provisions stated in Articles 81 and 82 of the Treaty of Amsterdam. If a UK organisation's conduct transgresses and violates competition law when dealing with EU member states, the Articles 101 and 102 of the European Treaty on the Functioning of the European Union will apply.

What is the Competition Act 1998?

The Competition Act states that the following behaviour is considered anti-competitive and is therefore penalised:

- The Act places great emphasis upon agreements between organisations which incorporate anti-competitive behaviour, such as fixing selling prices, sharing market information, controlling of producing and control of development.

- The Act also references organisations which abuse their dominant market position as this is effectively infringing upon the Competition Act.

The Competition Act is enforced by the Competition and Markets Authority (CMA), which investigates the conduct of businesses to uncover whether anti-competitive behaviour has taken place. If a business has acted in an anti-competitive manner, they will be subject to the following penalties stated in the Competition Act:

1) Financial Repercussions: An organisation can be fined up to 10% of their global turnover for infringing the provisions stated in Chapter I of the Competition Act.

2) Agreements which infringe upon Chapter I of the Competition Act will be classed as unenforceable and invalid.

3) Directors responsible for engaging in anti-competitive behaviour in any form can face a prison sentence as well as disqualification from their position for up to 15 years.

What investigations have been carried out under the Competition Act 1998?

In November 2006 the English Welsh and Scottish Railway Limited (EWS Ltd) were found guilty of infringing Chapter II of the Competition Act 1998 and Article 82 of the EC Treaty. This was following an investigation into EWS Ltd, which exposed that it had established contracts containing terms aiming to exclude competitors from the market. Therefore, EWS Ltd were abusing their dominant position within the market, to the disadvantage of other competitors in the coal haulage by rail industry. Moreover, EWS Ltd also pursued predatory pricing, which is explicitly stated as anti-competitive within the Competition Act. EWS Ltd were found guilty of multiple anti-competitive practices which resulted in the fine of £4.1 million.

The Competition Act has the purpose of enforcing competition law and the relevant bodies responsible for enforcing this legislation do not do so lightly. As an organisation, if you wish to avoid financial repercussions and the tarnishing of the organisation's reputation, it is important to comply with the Competition Act and commit to the prevention of anti-competitive behaviour.

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