Competition Legislation

Aims of Competition Policy:

• Wider consumer choice in markets for goods and services

• Effective price competition between suppliers

• Deal with anti-competitive behaviour which might have a negative effect on consumers

Anti-competitive agreements:

• Both UK and European competition laws prohibit agreements, arrangements and concerted business practices which appreciably prevent restrict or distort competition (or have the intention of so doing)

Examples of prohibited agreements:

• Agreements which directly or indirectly fix purchase or selling prices, or any other trading condition (e.g. discounts or rebates)

• Agreements which limit or control production, markets, technical development or investment (e.g. setting quotas or levels of output)

• Agreements which share markets or sources of supply

Price fixing: What is not allowed?

• Agree on prices with competitors

• Share markets or limit production to raise prices

• Impose minimum prices on different distributors such as shops

• Agree with competitors about what purchase price will be offered to suppliers

• Cut prices below cost in order to force a smaller or weaker competitor out of the market

Abuse of a dominant position:

• Both UK and EC competition laws prohibit businesses with significant market shares from unfairly exploiting their strong market positions

Example of Abuses of Dominant Position:

• Imposing unfair trading terms, such as exclusivity

• Excessive, predatory or discriminatory pricing

• Refusal to supply or provide access to essential facilities

• Tying (i.e stipulating that a buyer is wishing to purchase one product must also purchase other products)

Penalties for Businesses Caught:

• Up to 10% of annual sales

• Criminal prosecution

• Disqualification as directors

• Civil action by those affected