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What is the Enterprise Act 2002?

Compliance Knowledge Base | Competition Law

Posted by: Morgan Rennie Published: Mon, 10 Sep 2018 Last Reviewed: Mon, 10 Sep 2018
What is the Enterprise Act 2002?

The Enterprise Act 2002 is a key piece of UK legislation involved in the effort to enforce competition law and crack down on anti-competitive behaviour conducted by businesses in the UK. The Competition and Markets Authority (CMA) is responsible for enforcing the Enterprise Act 2002 across the UK. It is important for organisations to be aware of this legislation and what it demands from them regarding their business conduct. If your organisation does not become aware of the Enterprise Act 2002, there is potential for severe consequences.

What is the purpose of the Enterprise Act 2002?

The Enterprise Act 2002 was established with the purpose of tightening control on competition law and ensuring that those organisations which do conduct anti-competitive activity are penalised. The Enterprise Act focuses upon establishing penalties and regulations in order to deter organisations from engaging in anti-competitive conduct. Ultimately, the Enterprise Act has introduced changes to UK competition law to establish more awareness of competition law in the UK so that businesses cannot neglect its existence.

What is the Enterprise Act 2002?

What changes has the Enterprise Act 2002 introduced?

1) Directors who are involved in anti-competitive behaviour, whether this be formation of a cartel or agreements, can now face up to 5 years in prison. Moreover, they will be disqualified from holding the position of a director for 15 years. This shows that members of the management team within businesses need to ensure they comply with competition law and set the example.

2) It is considered a severe criminal offence for those who are engaged in and conduct cartel activity, and the respective investigations and penalties issued will reflect the severity of this offence.

3) The Act has empowered the Office of Fair Trading (OFT) and separated it from the government, making it independent. There can now be super-complaints issued to the OFT by certain bodies in relation to anti-competitive conduct.

4) With the empowerment of the OFT (which saw the abolition of the Director General of Fair Trading (DGFT)), now it has the previous powers enjoyed by the DGFT for the investigation process into competition law.

5) In terms of creating stricter penalties for anti-competitive behaviour, the Enterprise Act has increased the prison sentences imposed.

6) Following the investigation into a business which has been accused of anti-competitive behaviour, the competition commission can now go further and investigate the whole industry which that business was a part of. Consequently, competition commissions now have the capability to extend their investigations, ensuring they capture all anti-competitive conduct.

7) The Act now establishes more specific merger control upon the business sector.

8) The Commission Appeals Tribunal (CAT) has been established to allow companies to appeal against the competition commission, therefore ensuring all investigations conducted are fair.

Evidence of the Enterprise Act's control upon mergers can be seen within the Competition and Markets Authority's (CMA) most recent investigation into Sainsbury's and Asda on the 23rd August 2018. Sainsbury's and Asda have recently proposed a merger between the two organisations, and therefore the CMA have prepared their investigation into this merger to decide whether it infringes upon the Enterprise Act 2002.

The CMA want to discover whether this merger will have a specific negative impact upon the market and the consumers. This merger may have the potential to reduce the amount of choice available to consumers, and in effect this could create increased prices for lower quality goods.

Therefore, it is evident that the changes introduced by the Enterprise Act 2002 has effectively intensified competition law within the UK in order to deter businesses from engaging within anti-competitive conduct. The UK now has one of the most robust sets of competition legislation established.

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