Competition Bill [HL] · Competition Bill [HL] Bill 140 of 1997-98 The Bill introduces a prohibition of restrictive agreements and of abuses of dominant market positions. The current

RESEARCH PAPER 98/5328 APRIL 1998

Competition Bill [HL]Bill 140 of 1997-98

The Bill introduces a prohibition of restrictiveagreements and of abuses of dominant marketpositions. The current monopoly and anti-competitivepractices controls are largely replaced, as is the regimefor controlling restrictive agreements. The changesalign UK domestic competition law with the approachadopted by the Treaty of Rome which already appliesto UK firms when they operate within the EU's singlemarket.

The Bill alters the structure and responsibilities of theUK competition authorities. The Office of Fair Tradingreceives stronger powers, including the power to levysubstantial fines. The Monopolies and MergersCommission is renamed the Competition Commission,and gains a role as an appeal tribunal from the OFT'sdecisions, but largely loses its monopoly reporting role.The Bill will give those affected by breaches of thecompetition laws rights to sue in the courts fordamages.

The Competition Bill was introduced into the House ofLords on 15 October 1997. It is due to have its SecondReading in the Commons on 5 May 1998.

Christopher Blair

BUSINESS & TRANSPORT SECTION

HOUSE OF COMMONS LIBRARY

Library Research Papers are compiled for the benefit of Members of Parliament and theirpersonal staff. Authors are available to discuss the contents of these papers with Membersand their staff but cannot advise members of the general public.

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CONTENTS

I Introduction and Summary 7

II The Bill at a glance 8

III Background to the Bill 9

A. What is competition? 9

B. The path to reform: 1988 - 1997 11

C. Progress in the Lords and other criticisms 15

IV Part I, Chapter I: Restrictive agreements 19

A. Current legislation 19

B. New proposals: the Chapter I Prohibition 20

C. Exclusions and Exemptions 21

1. Summary 21

2. Exclusions 22

3. Vertical agreements 25

D. Exemptions 27

1. Summary 27

2. Guidance 27

3. Decisions 28

4. Individual exemptions 29

5. Criteria for exemptions 29

6. Block exemptions 30

7. Other types of exemption 31

V Part I, Chapter II: Abuse of a dominant position 32

A. Summary 32

B. Limited repeal of the former legislation 32

C. The Chapter II Prohibition 34

VI Part I, Chapter III: Investigation and Enforcement 37

A. Summary 37

B. Investigations 37

C. Offences 39

D. Enforcement 40

1. Summary 40

2. Directions 40

3. Fines 41

4. Breach of statutory duty 41

5. Small firms: limited exemption 42

VII Part I, Chapter IV: Competition Commission 44

A. Summary 44

B. Structure 44

C. Appeals 46

VIII Part I, Chapter V: Interpretation and implementation 48

A. Summary 48

B. Rules and guidance 48

C. Concurrent powers of regulators 49

D. Governing principles: EC law 53

E. Miscellaneous provisions 54

IX The rest of the Bill 56

A. Part II: Assisting European investigations 56

B. Part III: Monopolies 57

C. Part IV: Supplemental and transitional 58

X Specific issues 59

A. Predatory pricing 59

1. Introduction 59

2. Current UK system 59

3. New UK regime 60

B. Medicaments and price maintenance 62

1. Price maintenance 62

2. Resale Prices Act 1976 63

3. Office of Fair Trading scrutiny 64

4. Competition Bill 64

5. The Bill in the Lords 65

6. Remunerating pharmacies 66

C. Lookalikes 67

XI Bibliography 69

Research Paper 98/53

7

I Introduction and Summary

This Bill initiates major reforms to UK competition legislation. After a protracted series ofconsultation documents the Conservative Government issued a draft competition Bill inAugust 1996. This Bill builds on much of that work, but proposes more extensive changesand honours a Labour Party manifesto commitment. The new Government issued its ownconsultation and draft Bill in August 1997. The Bill itself was introduced in the House ofLords on 15 October 1997.

Under the current legislation, abuse of monopoly power is not prohibited but an investigativeprocedure exists which allows action to be taken against such abuses if they are found tooperate against the public interest. Restrictive trade agreements and cartels are subject toseparate legislation which has long been acknowledged to be slow, bureaucratic andineffective.

The Bill introduces a prohibition on restrictive agreements (the Chapter I Prohibition) and onabuse of a dominant market position (the Chapter II Prohibition). Both are modelled on thewording of EC competition provisions, which already apply to agreements and dominancewhere there is an effect on intra-state trade. The new prohibitions are to be enforced by theDirector General of Fair Trading (DGFT) who receives strong investigative powers and thepower to levy substantial fines on companies which breach the prohibition. In their sectors,the utility regulators will enforce the prohibitions concurrently with the DGFT and with thesame powers. Third parties who are affected by breaches will have the right to sue in thecourts for damages, although this right is not stated on the face of the Bill.

As part of the extensive changes, the body which used to conduct investigative enquiries intomonopolistic abuses, the Monopolies and Mergers Commission (MMC), is to be replaced bya Competition Commission, which will have a reduced investigative role but which will actas an appeal tribunal for the decisions of the Director General of Fair Trading under theprohibition regime. The current merger control regime, which also involves investigations bythe MMC, remains unaltered but investigations will now be handled by the CompetitionCommission. Residual powers to conduct competition inquiries under the current competitionlegislation will remain on the statute book, for use in exceptional cases.

Some of the Bill's most important clauses are picked out in the following section. This papernext outlines the lengthy consultations which preceded this Bill, and discusses each of thetwo Prohibitions in turn. It then discusses the common enforcement regime, the newCompetition Commission, and the keys to interpreting the Bill which consist of guidanceissued by the Office of Fair Trading and accumulated EC jurisprudence. Three specific andcontroversial cases are dealt with separately at the end: the 'press diversity' prohibition(clause 19), on which the Government was defeated in the Lords, which raises issues ofmarket dominance and price predation; the treatment of price maintenance for over thecounter medicines; and the question of competition from 'lookalike' products.


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II The Bill at a glance

clause 2 Chapter I Prohibition: prohibits agreements,decisions and concerted practices whosepurpose or effect is the prevention, restrictionor distortion of competition in the UK (cfArticle 85 of the Treaty of Rome)

clause 18 Chapter II Prohibition: prohibits the abuse ofa dominant position in the UK or a part of itwhere it affects trade within the UK (cfArticle 86 of the Treaty of Rome)

clauses 27-29 Gives the Director General of Fair Tradingthe power to require the production ofdocuments, and to enter premises by notice(without a warrant) and using reasonableforce (with a warrant)

clauses 33-34 The DG can issue directions requiring partiesto address breaches of the two prohibitions

clause 36 Interim measures can be imposed, pendingcompletion of an investigation

clause 37 Breach of the prohibitions may lead to a fineof up to 10 % of turnover

clause 46 Replaces the Monopolies and MergersCommission with the CompetitionCommission, which will hear appeals

clause 51 Enables procedural rules to be made by theDirector General

clause 54 With Schedule 10, provides for utilityregulators to exercise the powers of theDirector General of Fair Trading,concurrently, in relation to their sectors

clause 60 Governing Principles clause: Bill to beinterpreted in a manner consistent with ECprinciples and its competition case law


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III Background to the Bill

This section discusses the background to the Bill, which was prepared for in a series ofconsultation documents and a draft Bill (in August 1996) issued by the previous Government,and then, after the election by a further consultation paper and a draft Bill from the newGovernment in August 1997. It begins with a brief collation of various approaches to whatone might expect from a competition Bill and what a competition policy might encompass.

A. What is competition?

Richard Whish, whose Competition Law is the standard textbook, writes:

If the sole function of competition law were the maximization of consumerwelfare by achieving the most efficient allocation of resources and byreducing costs as far as possible, the formulation of legal rules and theirapplication would be relatively simple….In reality however many differentpolicy objectives have been pursued in the name of competition law, many ofwhich are not rooted in notions of consumer welfare in the technical sense atall, and some of which are plainly inimical to the pursuit of allocative andproductive efficiency. The result can be inconsistency and contradiction, but itis as well for the reader to be aware of this state of affairs before coming to thelaw itself. There is no single, coherent policy which binds UK or EEC lawtogether: there is no single premise from which decisions flow through theapplication of logic alone. In particular, competition policy does not exist in avacuum: it is an expression of the current values and aims of society and is assusceptible to change as political thinking generally.1

Whish argues that several different objectives can be ascribed to competition law, includingthe protection of the consumer, in the sense of safeguarding them against monopoly powerand anti-competitive agreements made by firms; the redistribution of economic wealth, bypreventing the concentration of resources in the hands of monopolists and by protectingsmaller competitors from such monopolists; and the pursuit of other policy aims such asregional policy aims, employment aims, and, in the case of the EC, single market aims.Whish also notes that competition policy, in a more political light, is about who should makecertain types of business decision: should it be left to individual firms in the hope that theirself-interest and the interests of public policy will co-incide, or should a more dirigist andinterventionist policy be adopted?2

1 (1993), pp.12-32 Ibid. pp.14-15


10

It is worth stressing that the different objectives Whish lists are not necessarilycomplementary, and are often competing aims. Moreover, he does not endorse all of them aslaudable aims. The introduction to the European Commission's XXVIth Report onCompetition Policy also emphasises the breadth of the aims of competition policy:

The aim of competition policy, through its impact on the basic structures ofthe European economy, is to ensure that markets acquire or maintain theflexibility they need to allow scope for initiative and innovation and to allowan effective and dynamic allocation of society's resources. This structuralaction means that competition policy interacts with most other broadly basedpolicies such as the development of the internal market, the policy on growthand competitiveness, the policy on cohesion, research and development policy,environmental policy and consumer protection……In the final analysis, likeall Community policies, competition policy aims to enhance the economicprosperity of the European Union and the well-being of all its people.3

In introducing the Bill in the Lords at Second Reading, Lord Simon of Highbury, Minister forTrade and Competitiveness in Europe, said:

The Bill shows our commitment to ensuring effective and fair competition. Itwould benefit both consumers and business.

It is perhaps more obvious that competition provides value and choice forconsumers. But, as Minister responsible for trade and competitiveness inEurope, I feel just as strongly about the spur which strong competition in theUK and continental Europe provides to the competitiveness of our companiesin overseas markets outside the European Union; that is, in the global market.The European Union should be the most competitive joint market in which ourcompanies can prepare for global competition, particularly in the fastdeveloping markets in the Americas and Asia. Time is short and, as we allknow, world competition is accelerating.4

The balance of interests between businesses and consumers was a constant theme in theLords, and is also reflected in opinions which have been published on the Bill, especiallywhen it was out for consultation. The Confederation of British Industry greeted the draft Bill:

The CBI believes an effective competition policy, ensuring competitivemarkets and efficient allocation of resources, works to the ultimate benefit of

3 1996 Report (1997), p.17 [SEC(97)628 final]4 HL Deb 30 October 1997 cc 1144-5


11

both business and consumers. It is essential in promoting the UK'sinternational competitiveness. It should be applied in a fair, consistent andproportionate manner and be transparent and predictable so that companiescan conduct business without unnecessary compliance burdens.5

The National Consumer Council argues:

A robust competition policy is vital to any economy. The National ConsumerCouncil knows that active competition between suppliers is the consumer'sbest guarantee of minimum prices, wide choice, adequate information andoverall value for money. We also recognise that in practice it is necessary toframe policies and laws that tackle the tendency of businesses to stiflecompetition and to manipulate markets.6

B. The path to reform: 1988 - 1997

The present Bill addresses restrictive agreements, which are currently legislated for underprocedures set up by the Restrictive Trade Practices Act 1976, and monopolistic and anti-competitive abuses, which are subject to the investigative regimes of the Fair Trading Act1973 and the Competition Act 1980. Proposals to reform the legislation in these areas dateback almost a decade, although hitherto the inclination has been stronger to make changes onrestrictive agreements than with regard to monopolistic abuses.

In July 1989 the then Secretary of State for Trade and Industry, Lord Young, published awhite paper on the reform of the Restrictive Trade Practices Act 1976. It followed an earlierconsultative green paper. The white paper, Opening Markets: New Policy on RestrictiveTrade Practices [Cm 727], aimed at reforming UK legislation on restrictive agreements fromthe current burdensome regime, with its system of requiring such agreements to be registered,towards a broader prohibition which would be more in line with EC legislation. The basicidea was that anti-competitive agreements would be covered by a blanket prohibition, but thatexemptions could be allowed if they were manifestly beneficial. This was modelled onArticle 85 of the Treaty of Rome, where article 85(1) states the prohibition, and article 85(3)allows for exceptions.

In the white paper the Conservative government made clear that there would be only a verylimited number of block exemptions to the new legislation. These would come in two mainclasses: agreements which need to be exempted because of international treaty obligations(for example, coal and steel products which are covered by extensive EC legislation), and

5 CBI response to the draft Bill, September 19976 Competition Policy Reform, NCC, September 1997


12

agreements which are provided for under another statute (say the Stock Exchange and otherfinancial institutions which are covered by the Financial Services Act 1986). There wouldalso be a mechanism for other agreements to apply for an individual exemption.

The Conservative government specifically intended that professions would in general besubject to the new legislation; that is, they were not to be widely exempted as they currentlyare under the Restrictive Trade Practices Act 1976 and related instruments:

There will be very few sectoral exceptions to the legislation. The Governmentis committed to the promotion of open markets throughout the economy andthe benefits of competition should only be withheld from a sector if thearguments for doing so are overwhelming. In particular, the Government haveconcluded that it is right that all professions should in future be subject to RTPlegislation.7

The paper maintained that many of the standards which are currently applied by theprofessions, such as entry thresholds, would be eligible for an exemption through a provisionsimilar to article 85(3), in other words by claiming that the practice is beneficial and notsignificantly anti-competitive. On these grounds the Conservative government rejected theinclusion of a general public interest exemption whereby anyone could claim that theirrestrictive agreement was in the public interest.

Proposals on monopoly power, the other area of reform, were advanced in a 1992consultation document: Abuse of Market Power: A Consultative Document on PossibleLegislative Options.8 The paper reviewed three options on reforming the controls forindividual companies which abuse monopoly positions or distort competition through anti-competitive acts. The idea was that the review would complement that of Restrictive TradePractices, which had proposed reforms for the treatment of more widespread abuses.

The three options (and the strengths and weaknesses which the Green Paper associated witheach) were:

(1) to strengthen existing legislation (this had the advantage of breadth and flexibility,but offered relatively little deterrence)

7 Opening Markets, Cm 727, para 1.98 November 1992 [Cm 2100]


13

(2) to replace existing legislation with a prohibition on anti-competitive andexploitative behaviour by companies with significant market power (this offeredeffective deterrence and control, but would cover a narrower range of conduct)

(3) to introduce a prohibition as in (2) alongside the existing legislation (this wouldcombine breadth and effective deterrence, but could potentially prove complex).

Solution 1 is closest in outline to what the draft Bill issued by the previous Governmentproposed in August 1996, although there were signs that it might have made more radicalchanges at a later date. Solution 2 is close to the provisions of Article 86 of the Treaty ofRome: Art. 86 prohibits the abuse of a dominant position insofar as it affects intra-community trade. Solution 3 is broadly what the present Bill adopts, although the role of thecurrent legislation under the Bill is greatly reduced.

Limited reforms to aspects of competition law, including some of the de minimis thresholds,were subsequently made in and under the Deregulation and Contracting Out Act 1994.However, pressure for progress on more substantial reforms continued. On 27 January 1994,the Director General of Fair Trading, Sir Bryan Carsberg, commented:

'While the Deregulation and Contracting Out Bill contains useful proposals, Iregret that parliamentary time could not be found this session to reform the1976 Restrictive Trade Practices Act. This reform would reduce burdens onbusiness generally while also creating a more effective protection ofcompetition. But I welcome Ministers' declared intention to introduce thisreform as soon as possible.'9

In the event, the next stage was to be consultative rather than legislative. In March 1996 theConservative Government issued a further consultation paper on how to implement itsproposals on the reform of the restrictive trade practices legislation, and for some limitedreforms on how abuse of market power (or monopolistic and anti-competitive behaviour) iscontrolled.10 The plan for restrictive practices was once more to replace the presentinvestigative system, the Register and the Restrictive Practices Court regime, with aprohibition system. Agreements which 'have the object or effect of preventing, restricting ordistorting competition in the UK' would be prohibited.11 The Director General would beprimarily responsible for investigation and enforcement under the new regime, and he wouldalso operate the planned system of exemptions and negative clearances.

9 'OFT contributes to deregulation initiative', OFT press release, 27 January 199410 Tackling cartels and the abuse of market power, Department of Trade and Industry, March 199611 Tackling cartels and the abuse of market power, Department of Trade and Industry, March 1996, p. 4


14

On the abuse of market power, the Government announced at the same time that it haddecided not to adopt a prohibition approach and ban abuse of market power. Instead it wouldstrengthen the powers of the Director General (DG) to deal with such abuses. The two mainchanges proposed were:

• to give the DG the right of entry to premises when investigating possible abuses.There would be a statutory duty on all parties to give him reasonable assistance

• the DG would be able to forbid specific practices through an interim order. Thiswould prevent an abuse from being perpetuated whilst an investigation - which maybe lengthy - was in progress

The Government then brought forward a Draft Bill, with an analysis of responses to theconsultation. Tackling Cartels and Abuse of Market Power: A Draft Bill, published in August1996, revealed plans substantially on the same lines as originally proposed, but with a helpfuldiscussion of some issues which were newly added (or were an option) for the proposed Bill.The August 1996 Draft Bill was not converted to an actual Bill before the General Election.

Despite the progress it initiated towards competition reform, the Conservative Governmentwas criticised in some quarters for failing to introduce concrete measures despite years ofpreparation and extensive consultation. The Labour Party, however, entered the 1997 GeneralElection with a specific commitment to competition reform. This had been spelt out inSeptember 1996 in Vision for growth: A new industrial strategy for Britain, and was part ofthe party's election manifesto:

'Competitiveness abroad must begin with competition at home. Effectivecompetition can bring value and quality to consumers. As an early priority wewill reform Britain's competition law. We will adopt a tough 'prohibitive'approach to deter anti-competitive practices and abuses of market power.'12

In August 1997, a consultation paper and draft Bill were issued, setting out the details onimplementing this commitment.13 The Competition Bill 1997-98 [HL 33] was introduced inthe House of Lords on 15 October 1997.

12 New Labour because Britain deserves better, April 199713 A prohibition approach to anti-competitive agreements and abuse of dominant position: Draft Bill, August

1997. Responses to this consultation were deposited in the Library by the DTI.


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C. Progress in the Lords and other criticisms

By the time the Bill had been introduced the DTI had received over 150 responses to itsAugust consultation. Margaret Beckett claimed that the Government's approach 'has beenwidely welcomed by companies, consumer groups and legal practitioners. The consultationhas confirmed my view that the reforms the Bill will introduce are important, wide rangingand long overdue'.14 In the Lords, at Second Reading, Lord Fraser of Carmyllie for theConservatives noted that this level of response might not be taken as overwhelmingendorsement:

There is serious alarm over the structure of parts of the Bill and the detailwithin it, or, as I indicated earlier, the absence of detail.15

There seems to be widespread acknowledgement that the competition laws were in need ofreform, especially those which covered restrictive trade agreements. There is also arecognition that the new law will strengthen the hands of consumers by giving them rights totake actions in the courts against those who breach the competition laws. The powers of thecompetition authorities are enhanced, and their ability to take interim action against abuse,and the power to fine, along with the other toughened investigative powers, all combine tosuggest a potentially strong deterrent effect within the new laws.

Yet there is a significant level of disagreement among respondents to the consultation andcommentators generally about such matters as the way the Prohibitions are framed, thedesirability of using criminal sanctions for commercial offences, the proposed relationshipbetween the regulatory and competition regimes in the utility sectors, the new institutionalstructures, and the compliance burdens which the new regime will place on business. Thereare also those whose criticisms relate more specifically to the effects they foresee of the Billon their own areas of activity. Many of these criticisms are quite detailed and have beenexplored in the debates in the Lords, where the Government acknowledged that up to ThirdReading it had made some twenty six amendments to the Bill in response to concerns raisedin the House.16 There are others, though, who criticise the broad principles of the Bill itself.

According to a newspaper report of a study by Global Competition Review, two thirds ofeconomists are opposed to the Bill's Chapter II Prohibition of abusive conduct, whilst threequarters of competition lawyers support it.17 The Bill extends two Prohibitions which alreadyapply at EC level to the realm of domestic competition law. Simon Baker, a consultant atNational Economic Research Associates, has argued that this approach is not justified in

14 'Competition Bill to benefit consumers and business', DTI press notice 97/662, 16 October 199715 HL Deb 30 October 1997 c.115016 HL Deb 5 March 1998 c.138117 'Lawyers and economists reject competition bill', Financial Times, 2 April 1998


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relation to abuse of dominance.18 He claims that the European Commission rarely hasrecourse to its anti-dominance prohibition against UK companies, whilst the domesticauthorities have had regular recourse to the legislation which is to be replaced in favour of theEC-style prohibition. He thinks the new legislation could risk stifling competition through itsarbitrary power to fine, and that it would have been better to toughen the current FairTrading Act 1973 than to adopt the new prohibition. He is also doubtful of the claimedcompliance advantage for businesses from the change, which is based on the fact that somefirms already have to operate within the EC prohibitions:

Arguing that the full force of a law should be extended to the entire economysimply because it is applied to part of it is surely flawed.19

For the Opposition, John Redwood has been highly critical of many aspects of the Bill notleast the uncertainty for business which he claims will result from the changed regime. Hehas also attacked the underlying philosophy of the Bill's alignment with the Treaty of Romeprovisions:

Mrs Beckett has already given a lot of ground to Brussels. In many importantcases the British jurisdiction now just acts as a lobbyist or observer of theEuropean competition authorities. The new law adopts the provisions of theconsolidated treaty of the European Union as British competition law.Meanwhile, matters like the relationship between the brewer and the pub,hammered out painfully at home, are now also the object of separatediscussion and review in Brussels. The DTI claims that the new law wouldremove overlap and conflict between London and Brussels. This is not true.Not all separate British competition law is being repealed, and a large newCompetition Authority is being established in Britain. There are bound to betimes when this body misunderstands Brussels's wishes, even if it is primarilymotivated by doing Brussels's bidding.

What should Mrs Beckett do to get out of her hole? The simplest thing wouldbe to abandon her Bill, and set out a new concordat with Brussels over whodoes what. Business needs to know who is in charge of which cases.20

The Opposition has sought in the Lords to increase some of the protections in the Bill, and toget the Government to clarify and explain some of the key uncertainties and relationshipsproposed by the Bill. The Bill was also the subject of two Government defeats by the Lords.The first concerned predatory pricing in the newspaper sector, the second the treatment of thecurrent exemption from resale price maintenance controls which over the counter medicinesenjoy. The first, which inserted a new 'press diversity prohibition' into the Bill (clause 19), is

18 'Limits of prohibition', Financial Times, 2 September 199719 Ibid.20 'Putting British business at a competitive disadvantage', The Times, 9 February 1998


17

known as the McNally amendment.21 It introduces a more precise definition of abusiveconduct than the rest of the Bill and applies it solely to the national newspaper market. Its aimis to protect press diversity, and among the practices which it singles out is predatory pricecutting. (The thorny issue of predation is discussed in more detail in 'Section X SpecificIssues' below.) Those who spoke to the amendment were particularly critical of the behaviourof the owners of The Times, and its long-standing price-cutting policy:

Lord McNally ….This amendment has one intention and one only: to promotethe framework of fair and transparent competition in our newspaper industry,with the intention of sustaining diversity, quality and choice. It does make adistinction between newspapers and other goods and services because webelieve that newspapers are different from tins of beans. They are not only aproduct, they are, as I have said, an essential ingredient for a functioningdemocracy.

….. in recent years, because of predatory pricing, we have seen competitionreplaced by anarchy, where our national newspapers are invited to competeonly to see who bleeds to death first.

…..The pricing policy of The Times does not make sense unless it is to clearthe field of two major competitors--the Independent and the Telegraph;indeed, the Independent may be the only accidental casualty in the cross-firebetween The Times and the main target, the Telegraph. In crude businessterms, a broadsheet field cleared of major rivals with the prospect of perhaps a2-million circulation would be extremely good business for The Times and itsowner. But what is good business for Mr. Murdoch is not necessarily goodsense for a healthy democracy or for a diverse and vigorous press.

…..When Robin Cook tried three-and-a-half years ago to act in exactly theway that I am trying to act tonight, the then Director General of Fair Trading,Mr. Carlsberg, rebuffed him with these words,

"At times there is a fine line between aggressive price competition andpredatory pricing".

Quite so. This amendment draws that line more clearly and distinctly thandoes the general Bill. It gives powers that are special because the diversity ofpress ownership is special. Accepting this amendment will make it a betterBill and a stronger Bill. If the amendment is carried, instead of losing titles,we will be opening the door to newcomers; instead of consolidation of power,

21 Amendment 24 at Report Stage. See HL Deb 9 February 1998 cc 913-35. The Amendment was passed by121 votes to 93.


18

which is already reaching dangerous and unacceptable proportions, we shallbe encouraging pluralism and choice.22

The Government argues, however, that it is unnecessary to specify predatory pricing since theBill already addresses this practice, and that it is undesirable to use competition policy tosingle out one particular sector of the market. Voices were also raised in the House in supportof The Times.

The Government's other defeat, over price maintenance on medicaments, concerns the issueof the viability of community pharmacies.23 These pharmacies argue that if the current resaleprice maintenance which applies to over the counter medicines is removed, they would lose acrucial part of their business to such competitors as supermarkets, and many would be forcedto close. Within the Bill, the key issue was how long the existing exemption fromcompetition controls could be retained, and the amendment therefore sought to alter thetransitional arrangements for the Bill. The Amendment was moved at Third Reading by LordMcNally again, in the absence of Lord Morris of Manchester who was unwell. It was passedby 138-81. The issues are discussed below in Section X Specific Issues.

22 HL Deb 9 February 1998 cc 913-1523 HL Deb 5 March 1998 c.1301


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IV Part I, Chapter I: Restrictive agreements

A. Current legislation

The weakness of the current UK legislation on controlling restrictive agreements has longbeen recognised. It is accepted that certain types of agreements between suppliers of goods andservices may distort competition and be harmful to the public interest. Under the current system,agreements, if they fall within the scope of the Restrictive Trade Practices Act 1976, have to beregistered at the Office of Fair Trading. The Director General of Fair Trading (DGFT), whomaintains the register, then refers such agreements if appropriate to the Restrictive PracticesCourt which has the power to strike down those agreements which are held to be against thepublic interest.

The faults of this system can be brought out by describing its procedures in more detail.Agreements have to be notified to the OFT within three months of being made. The restrictionsin agreements cannot be operated unless they have been notified. Once notified, manyagreements are not in fact reported to the RP Court on the grounds that they are too insignificantto merit it (s.21(2)).24 There are a number of exemptions in place. These include agreementswhich are a necessary part of a scheme of national economic importance; agreements which areprovided for by statute; the activities of some professions, and international transportagreements. Otherwise it is for the parties to demonstrate to the Court that their agreement is inthe public interest.

The number of cases which reach the Court is relatively small (less than one per cent ofregistered agreements), but even fewer agreements are upheld by the Court. One examplewhich was found to be beneficial was the Net Book Agreement, which fixed the price of so-called net books. The Court ruled that the Agreement was in the public interest in 1962 and1964, but in 1995 the DGFT asked the Court to review that decision, and in March 1997 theNet Book Agreement's exemption from the restrictive trade practices legislation and theresale price maintenance legislation was ended.25 There is only one remaining exemption inplace, that for over the counter medicines, or medicaments. That exemption has now beenreferred to the Restrictive Trade Practices Court by the DGFT for re-examination, althoughthe exemption has many supporters and led to a Government defeat on the current Bill in theLords.26

24 About 90 per cent of agreements were dealt with under this procedure, according to Restrictive Agreements,Office of Fair Trading, 1995

25 'Net Book Agreement referred to court', Office of Fair Trading 15/95, 31 March 1995; 'Court strikes downNet Book Agreement', Office of Fair Trading 07/97, 13 March 1997

26 This issue is discussed in detail below at 'Section X Specific Issues'


20

As the account of the background to the present Bill shows, there have been a number ofproposals previously to reform the current system which is felt to be both unwieldy andineffective. The nature of the problem had been clearly identified in a 1988 Green Paper, andsubsequent consultation documents of various hues have continued to describe the faults in thesame terms:

Too much time is spent in scrutinising innocuous agreements. Agreements which may besignificantly anti-competitive can escape its scope. It does not act as an adequate deterrent to anti-competitive agreements which may be damaging to the economy as a whole.27

B. New proposals: the Chapter I Prohibition

The Bill proposes moving from the present form-based approach - where any agreementwhose form places it within the scope of the Act is subject to the registration procedure - toan effects-based approach. Under the effects approach, agreements are to be judged on theeffects that they have on competition. This is enforced by a straightforward prohibition ofanti-competitive agreements which removes the need for a system of registration. The newprohibition mirrors the equivalent provision of the Treaty of Rome which already applies toanti-competitive or restrictive agreements which have an effect on intra-state trade. Bymodelling the form of the new national law on an existing EC provision, which alreadyapplies to some UK companies, the Government argues that companies will benefit from areduced compliance burden.

Article 85 (1) of the Treaty of Rome states:

The following shall be prohibited as incompatible with the common market: all agreementsbetween undertakings, decisions by associations of undertakings and concerted practices whichmay affect trade between Member States and which have as their object or effect the prevention,restriction or distortion of competition within the common market…

The new UK prohibition of anti-competitive agreements is contained in clause 2 of the Bill,which falls within Chapter I of Part I. The prohibition is referred to as the Chapter Iprohibition. It states:

2(1) Subject to section 3, agreements between undertakings, decisions by associations ofundertakings or concerted practices which -

(a) may affect trade within the United Kingdom, and

27 Tackling cartels and the abuse of market power, Consultation Document, March 1996, p. 4 ('Blue Paper')


21

(b) have as their object or effect the prevention, restriction or distortion of competition within theUnited Kingdom,

are prohibited unless they are exempt in accordance with the provisions of this Part.

Clause 3, to which the prohibition refers, contains a number of exclusions and a mechanismfor making further exclusions. The prohibition itself contains a list of practices which may becovered by the prohibition. The list reproduces word for word a list contained in Article 85 ofthe Treaty of Rome. The list is illustrative not exhaustive, and follows the European list toavoid UK firms being subject to the potential confusion of being subject to divergent criteria.

The illustrative list in clause 2(2) includes:

'agreements, decisions or practices which

(a) directly or indirectly fix purchase or selling prices or any other trading conditions;

(b) limit or control production, markets, technical development or investment;

(c) share markets or sources of supply;

(d) apply dissimilar conditions to equivalent transactions with other trading parties, therebyplacing them at a competitive disadvantage;

(e) make the conclusion of contracts subject to the acceptance by the other parties ofsupplementary obligations which, by their nature or according to commercial usage, have noconnection with the subject of such contracts.

C. Exclusions and Exemptions

1. Summary

Although the Prohibition has been framed in the widest possible terms, the Bill provides bothfor types of agreement to be excluded and for individual and block exemptions which can begranted to undertakings by the Director General (DG) and the Secretary of State. There are aconsiderable number of exclusions listed in the first three schedules to the Bill. Firms canreceive an indication of whether their agreements might fall foul of the prohibitions, undertwo procedures: the quicker guidance route, and the more public decision route. They canalso seek individual exemptions from the Prohibition at the same time. Seeking guidance or adecision provides some interim protection against action by the competition authoritiesagainst an agreement.

The extent and nature of the exclusions have been the subject of some debate. One can arguefor a start from the very range of exclusions that competition law does not aim to strike downall restrictive agreements. That is, although commercial agreements may be restrictive innature, it does not necessarily follow that on balance they are against the public interest. This


22

section may not make for interesting reading, but its detail is crucial to achieving a Bill whichboth protects consumers adequately and yet does not place an unnecessary burden ofcompliance on businesses. The drafting of this Part of the Bill is designed to weight theProhibition and its associated procedures with the balance of public interest, so that beneficialagreements are not prohibited and equally so that harmful agreements do not escape. Oneespecially difficult category to judge is vertical agreements.

2. Exclusions

The Bill excludes a number of categories of agreement from the scope of the prohibition onrestrictive agreements.

• Mergers: whether they fall to be dealt with at national or EC level, mergers andconcentrations will continue to be dealt with under the existing merger controls of theFair Trading Act 1973 rather than the Chapter 1 prohibition (Schedule 1, Part 1). The1973 Act defines a merger as where two or more enterprises cease to be distinctenterprises. Subject to a de minimis threshold, mergers may be referred to the Monopoliesand Mergers Commission for a formal investigation into the competition and publicinterest concerns raised by the merger. Large mergers between enterprises which areactive in more than one EU country are investigable under the separate procedures of theEU Merger Regulation. The exclusion from the Chapter I Prohibition means thatagreements between enterprises which satisfy the definition of a merger will normally belooked at as mergers and not as restrictive agreements. The exclusion therefore preventsmerger agreements from being subject to two forms of competition scrutiny.

• Agreements which are subject to competition scrutiny under other statutes, including therulebooks of the Stock Exchange and the financial regulators (under the FinancialServices Act 1986), and some agreements between commercial broadcasters which aresubject to a regime imposed under the Broadcasting Act 1990 (Schedule 2).

• Agreements which are planning obligations under certain sections of the Town andCountry Planning Act 1990, or are made under certain provisions of the Town andCountry Planning (Scotland) Act 1997 and the Planning (Northern Ireland) Order 1991(Schedule 3, para 1).


23

• Agreements which were deemed to be of minor significance and not worth referring tothe Restrictive Practices Court under the Restrictive Trade Practices Act 1976. The 1976Act allowed agreements of minor significance to escape referral to the RTP Court on thedirections of the Secretary of State by virtue of s.21(2) where otherwise the DirectorGeneral (DG) would have had a duty to make a referral. The section prevented the Courtfrom becoming swamped with restrictive agreements of little consequence, and can beseen as a proportionality provision. Agreements for which the Secretary of State hasalready issued directions under the section are known as section 21(2) agreements.

Schedule 3, para. 2 of the Bill gives continuing protection to such agreements under thenew regime, by providing that the Chapter I prohibition does not apply to them. Thismeans that restrictive agreements which were previously thought to be of minorimportance will not automatically have to be re-examined under the new Act. Theexclusion for section 21(2) agreements does not apply indefinitely. If an agreement isaltered materially, the exclusion is lost. Moreover, the DGFT has the power to bring theexclusion to an end if he considers that under the new Act the agreement falls foul of theChapter I prohibition and that it is not likely to qualify for an unconditional individualexclusion (Sched. 3, para. 2(7)). The exemption is terminated in writing by directionsissued by the DGFT. The permanent exclusion of s.21(2) agreements from the newregime, subject to the clawback provisions, is the result of an amendment in the Lords.28

Originally the Bill had required this type of agreement to be reviewed after a five yeartransitional period. This item had been the largest non-recurring cost in the Bill'scompliance cost assessment.

• Agreements on EEA regulated markets (Sched. 3 para. 3).

• Undertakings entrusted with providing services of general economic interest and revenueproducing monopolies. This exclusion reproduces a provision of the Treaty of Rome. Theintention is in part to secure the uniform charging rate for letters. (Schedule 3, para. 4).

• Agreements which are necessary to comply with legal requirements (Sched. 3, para. 5).

• Agreements which are necessary to avoid conflicting with international treaty obligations.The exclusion is conferred by the Secretary of State excluding an agreement or type ofagreement from the Prohibition (Sched. 3, para. 6).

28 Amendment 47 at Report Stage; HL Deb 9 February 1998 c.965


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• Where there are 'exceptional and compelling reasons of public policy' why the Chapter IProhibition should not apply, either to a particular agreement or to a class of agreement(Sched. 3 para. 7). The Secretary of State must be satisfied that an exclusion is justified:it is made by order.

• Agreements which apply to coal and steel, where the European Commission hasexclusive jurisdiction under the European Coal and Steel Community Treaty, are notcovered by the Chapter I Prohibition (Sched. 3 para. 8).

• Certain agricultural agreements are excluded. These include agreements which covernational market organisations; which are necessary for the attainment of the objectives ofthe Common Agricultural Policy, as set out in Article 39 of the Treaty of Rome; andagricultural co-operatives relating to the production, sale or use of joint facilities, wherethere is no obligation to charge identical prices (Sched. 3 para. 9). In keeping with theapproach adopted for other exclusions, agricultural agreements do not gain perpetualprotection for anti-competitive agreements. Saving provisions remove the exclusionwhere the European Commission finds that an agreement breaches the Treaty of Rome'sprohibition of restrictive agreements (Article 85(1)), and where DGFT has given adirection to remove the exclusion. The exclusion of agricultural agreements wasintroduced at Report Stage in the Lords in response to representations.29

• Professional rules, which appear on a designated list, including those of the legalprofession, various medical services, and the services of architects, surveyors andaccountants are excluded. These exclusions at present reproduce those which exist underthe Restrictive Trade Practices Act 1976, with the addition of insolvency services. Theexclusion for professional rules applies only to designated rules. The procedures fordesignating rules and for keeping those rules under scrutiny are set out in Sched. 4 Part I.The system seems designed to maintain a relatively narrow corpus of excludedprofessional rules. Part II of Schedule 4 lists the professional services mentioned above.The regulator of one of those professional services, or a body which wishes to regulatesuch a service, can apply to the Secretary of State for designation (para. 3). The Secretaryof State maintains a list of rules which have been notified to him under para. 3 and whichhe considers are professional rules (para. 2). Alterations to designated rules have to benotified to both the Secretary of State and the Director General (para. 4). The DirectorGeneral is required to keep the list of designated rules under review, and to advise theSecretary of State if he feels that some or all of the rules in question should no longer be

29 Amendment 59 at Report Stage; HL Deb 9 February 1998 c.973


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designated (para 5). An exclusion can be revoked by the Secretary of State on the receiptof such advice, but he must first consult any other Minister who has responsibilities forthe particular professional service. There were a number of unsuccessful attempts duringthe Bill's progress through the Lords to alter the scope of this exclusion, and especially toexpand the range of excluded professional rules.30

The already extensive list of exclusions from the Chapter I Prohibition can be amended oradded to by Order under clause 3 and Schedule 3. If the Secretary of State wishes to providefor an additional exclusion under Schedule 3, then he may amend the Schedule by order, butonly if it appears to him that one of two conditions are satisfied. The first condition is that theagreements which would be covered by the additional exclusion do not in general have anadverse effect on competition. The second condition allows an exclusion from Chapter I ifthe agreements would in general be better considered under the alternative competitionprovisions of the Chapter II prohibition or the Fair Trading Act 1973 (clause 3(4)).

3. Vertical agreements

The Bill at present does not refer to one of the most controversial possible exclusions:vertical agreements. A vertical agreement is one between suppliers and customers in thesupply chain, that is, between those at different levels of the same supply chain. Such anagreement may contain restrictions on how a product is sold or marketed, for instance. In itsAugust 1997 consultation document, the Government rehearsed the arguments for and againstincluding vertical agreements in the list of exclusions. (Price-fixing agreements were neverintended to benefit from an exclusion.) It noted that whilst vertical agreements couldencourage competition in some circumstances, they were a cause of concern whenaccompanied by market dominance. The document argued that many vertical agreements areessentially harmless, and that business would face an unnecessary burden if it was required toexamine all such agreements for conformity with the new competition requirements. Itthought that where vertical agreements did give rise to competition concerns, they could bedealt with under the existing provisions to examine complex monopolies (under the FairTrading Act 1973), or under the proposed prohibition on abuse of a dominant position whichthe present Bill contains. However, whilst the Government acknowledged a readiness toinclude an exclusion for vertical agreements in the Bill, it acknowledged that drafting such anexclusion so that it was neither too wide nor too narrow was difficult. The option remains forsuch an exclusion to be included in the Bill either by an amendment, or under the ordermaking power of clause 3.

In its comments on the draft Bill, which was published in August 1997, the CBI came outstrongly in favour of including an exclusion for vertical agreements:

30 See for example Amendment 64 at Report Stage; HL Deb 9 February 1998 c.976


26

The majority of vertical agreements have pro-competitive or benign effects oncompetition. This is an area in which the new UK law should seek to improveupon the approach of the European Commission, which is itself under review.We consider that it is essential that vertical agreements are removed from thescope of the Chapter I prohibition, in order to reduce the compliance burdenson industry and the costs of administration to be incurred by the OFT. Asuitable exclusion should be incorporated into the Bill itself.31

The National Consumer Council was as strongly opposed to excluding vertical agreements:

NCC is not opposed to reducing the burden on business or on the regulator insubmitting and scrutinising benign vertical agreements. But the simplisticsolution of excluding all vertical agreements from the legislation could havefar-reaching and very expensive consequences for consumers. Also, we cansee no logic in including price-fixing agreements within the scope of theprohibition, which we support, while excluding the other vertical agreements,such as market sharing, and forms of selective distribution which can haveexactly the same effects on consumers as price-fixing. In our view it is muchbetter to follow the EU pattern and to include vertical agreements within thelegislation and to use the exemption provisions which allow consumers topartake of a fair share of the resulting benefits.32

John Redwood's response to the draft Bill succinctly illustrates the inherent difficulties:

Most serious of all is the legal difficulty you are creating for verticalagreements. You need to avoid pre-empting the MMC's work on sucharrangements, as in the case of the present enquiry into the travel trade. If youexclude them in Statute you run the risk of allowing anti-competitivepractices. If you do not exclude them you will create havoc in many legitimatebusinesses. The Opposition will be watching this particularly close. I saw noneed for these legal changes when I last reviewed competition policy, so wewould not ourselves create this problem.33

31 CBI response, September 199732 Competition Policy Reform, National Consumer Council, September 1997, pp11-1233 Rt Hon John Redwood MP to Rt Hon Margaret Beckett MP, 16 September 1997, [Response to consultation

paper of August 1997]


27

D. Exemptions

1. Summary

Not all agreements which fall outside the excluded categories of agreements will be subject tothe Chapter I Prohibition. In addition to the exclusions, it will also be possible to obtainindividual exemptions (see clause 4) from the prohibition, and block exemptions (see clause6) which apply to particular classes of agreement. A third class of exemption, parallelexemptions (see clause 10), covers agreements which are exempted from the equivalent ECprohibition or which would be exempt from such a prohibition if their agreement had theeffect on intra-state trade which is necessary to bring agreements within the EC's prohibitionregime. There is a fourth class of exemption, a section 11 exemption (see clause 11), whichmay be granted to agreements which are given exemption under transitional provisions of theEC treaty. Exemptions whilst in force place an agreement outside the Prohibition.

Before considering the grounds on which an exemption may be given, it is necessary to lookat two procedures which are designed to give enterprises an indication of the competitionauthorities' view of specific agreements. Businesses will be able to seek advice from theDirector General (DG) on whether an agreement infringes the Chapter I Prohibition. Thisadvice, which will give them a greater degree of certainty in their conduct of their affairs, willalso offer them a measure of protection from penalties for breaching the prohibition. Thereare two procedures: an application for guidance and an application for a formal decision.The procedures will be available to businesses either when they seek an exemption or whenthey seek to establish that an agreement does not infringe the prohibition in the first place(negative clearance).

2. Guidance

The guidance process (clauses 13, 15) is quicker but less thorough: guidance would besought and given in confidence and the DG would not seek the opinions of third parties. It istherefore less certain than the formal decision since the DG's guidance is based oninformation from a single source. When an application for guidance is made to the DG underclause 13, the DG will give guidance on whether the agreement is likely to infringe theChapter I Prohibition. If it would, he may also give an indication of whether a block, parallelor section 11 exemption applies, and on whether he would be likely to grant an individualexemption to the agreement if asked. An individual exemption is not, however, availablefrom an application for guidance. Whilst the agreement is under consideration by the DG,that is before the guidance is given, no penalty under Part I of the Act may be imposed.


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If the DG issues guidance to the effect that an agreement is unlikely to infringe the Chapter IProhibition, or that an exemption is likely to be available, then the Director General is to takeno further action against the agreement except in certain limited circumstances (clause 15).He may take further action if he has reasonable grounds for believing that there has been amaterial change in circumstances since his guidance was issued, or where he has reasonablegrounds for suspecting that the information on which his decision was based was materiallyincomplete, false or misleading. He can also look again at the agreement if a complaint ismade to him about the agreement by a third party, or if one of the parties to the agreementapplies to him for a formal decision about the agreement.

In commercial terms the most valuable benefit of guidance is the immunity which it conferson the parties to the penalties which may be invoked where the Chapter I Prohibition isbreached (c.15(3)). This immunity may, however, be removed if the DG takes further actionagainst the agreement in the circumstances listed above, if he considers it likely that theagreement will infringe the Prohibition. When the immunity is removed, notice must be givenby the DG to the party who had applied for guidance. The immunity's removal cannot pre-date the issue of that notice unless the DG reasonably suspects that information provided by aparty to the agreement (and which he used to form his guidance) was in a material particularincomplete, false or misleading (c.15(5)).

3. Decisions

The formal decision procedure (clauses 14, 16) results in a full reasoned decision by the DGand is made on a wider basis, including evidence obtained from third parties. Whilst thisprovides for greater certainty, the procedure is slower than an application for guidance underclause 13 and is not confidential. The subject of a decision that the prohibition is notinfringed enjoys immunity from the Chapter I Prohibition. This immunity may be removed,although the DG will not take further action unless he suspects that there has been a materialchange in circumstances or that he had been supplied with misleading, incomplete or falseinformation. Unlike guidance, a complaint from a third party is not sufficient in itself to endthe immunity since evidence from third parties has already been sought as part of the decisionprocess.

A party who applies for a decision under clause 14 receives a decision on whether the chapterI Prohibition has been infringed, and if there has been no infringement, whether this isbecause an exclusion or an exemption applies. Whilst the DG is considering the applicationfor a decision, no action can be taken against the agreement under Part I of the Bill. If the DGsubsequently decides that the Prohibition has not been infringed, then under clause 16 theDG can only take further action under Part I of the Bill if he has reasonable grounds forbelieving that there has been a material change in circumstances since the decision was given(c.16(2)(a)), or if he has a reasonable suspicion that the information on which the decisionwas based was false, incomplete or misleading in a material particular (c.16(2)(b)). The


29

immunity from penalty under Part I of the Bill can be removed if the DG takes action in thesecircumstances, but only if he considers it likely that the Prohibition will be infringed, andonly by prior notice (c.16(4)). Immunity can be revoked prior to the issue of a notice if aparty to the agreement has provided materially incomplete, false or misleading information tothe Director General (c.16(5)).

4. Individual exemptions

An application for a decision may also include a request for an individual exemption to begranted (clause 14(3)). This is the only way in which an individual exemption can beobtained, and it seems initially odd that such an important immunity is apparently obtainedmerely as a spin-off to an application for another procedure, a decision. That said, there isclearly no need for an individual exemption to be given if an agreement either does notbreach the Prohibition, or is already covered by an exclusion or a block or parallel exemption,so it makes sense to limit the recourse to individual exemptions to cases where they areappropriate. Moreover, there was concern expressed in the Lords that businesses might bediscouraged from seeking guidance if as a consequence they would also be considered for anindividual exemption and in so doing lose the advantage of confidentiality which theguidance procedure normally gives.34

An individual exemption, like a block exemption, places an agreement outside the controls ofthe Prohibition, so it is important that exemptions are only given in appropriatecircumstances. Clause 4 states that an individual exemption may be granted by the DirectorGeneral of Fair Trading where a request for an individual exemption has been made as partof an application for a decision under c. 14, and where the criteria for granting an exemption(which are set out in c.9) are satisfied. An individual exemption if granted will state how longthe exemption lasts for, and may include such additional conditions or obligations as theDirector thinks appropriate to impose (c.4(3)). The exemption can have effect from a dateprior to its grant; the procedures for how its duration may be extended will be set out in rulesto be made by the DG, under clause 51 (c.4(5), (6)).

5. Criteria for exemptions

Individual exemptions and block exemptions will only be granted if the criteria of clause 9are satisfied. An agreement meets these criteria if it:

34 The Government addressed these concerns in Amendment 73 at Report Stage; HL Deb 9 February 1998


30

contributes to improving production or distribution, or promoting technical oreconomic progress, while allowing consumers a fair share of the resultingbenefit

but does not impose on the undertakings concerned restrictions which are notindispensable to the attainment of these objectives, or make it possible for theundertakings to eliminate competition in respect of a substantial part of theproducts in question

The wording of clause 9 is based on Article 85(3) of the Treaty of Rome, where theseconditions when satisfied allow the prohibition of Article 85 to be disapplied. Itsincorporation into the Bill as the grounds for an exemption ensures that any exemptionsgranted to UK agreements will be at one with European competition law also.

6. Block exemptions

The criteria of clause 9 apply also to block exemptions. Block exemptions exempt classes ofagreements from the Prohibition. The grant of block exemptions is governed by a differentprocedure to that for individual exemptions. Where particular categories of agreement satisfythe criteria of clause 9, the Director General may, under clause 6 recommend, that theSecretary of State makes a block exemption order for that category of agreement. TheSecretary of State may adopt the DG's recommendation as it stands, or he can modify it. Theorder which confers the exemption may be accompanied by conditions or obligations whichattach to the exemption, and the duration of the exemption may be limited.

Before the Director General makes a recommendation to the Secretary of State for a blockexemption (under c.6(1)) he is required to publish his proposals so that they are brought tothe attention of those likely to be affected, and to consider any representations which hereceives (clause 8). The DG can also make a recommendation that a block exemption bevaried or revoked (c.8(3)). If he does so, he is also required to consult on the proposal. TheSecretary of State can, under c.6(2)(b), modify a block exemption proposed by the Director:if he does so, he must inform the DG and take into account his comments (c.8(2)).TheSecretary of State can also vary or revoke a block exemption without a proposal by the DG:in such cases he must inform the DG and take his comments into account (c.8(5)).

Agreements which are not covered by the block exemption but nevertheless satisfy certaincriteria specified in a block exemption order can apply to be treated as if they fall within theblock exemption (clause 7). Agreements which hope to take advantage of this provision mustbe notified to the Director General. The agreement can take advantage of the exemptionunless the DG gives notice within a specified notice period that he is opposed to theagreement being treated in this way. If he gives such notice, the agreement is then considered


31

as if it were an application for a decision and for an individual exemption (i.e., as if it hadbeen made under clause 14).

7. Other types of exemption

There are two additional types of exemption. A parallel exemption under clause 10 is anexemption from the Chapter I Prohibition on the basis that the agreement is either exemptfrom the EC's equivalent prohibition of restrictive agreements, or that the agreement wouldbe exempt if it had an effect on intra-state trade. (The EC prohibition only applies toagreements which have an effect on trade between member states.) A parallel exemption mayapply by virtue of an EC Regulation, an exemption from the Commission, or by virtue of anunopposed notification under the objection or opposition procedures. The block exemptionsmade by Council Regulations include agreements in respect of bilateral exclusive supplyarrangements (such as exclusive distribution agreements and franchising agreements);research and development and specialisation agreements; air transport; and certainagreements between insurers. The DG can attach conditions to a parallel exemption, and hecan also cancel such an exemption: the use of such powers is to be governed by rules issuedby the Director under clause 51. A section 11 exemption under clause 11 would be permittedif the Secretary of State uses his powers under clause 11 to make provision for granting anexemption to agreements which are covered by rulings made under Article 88 of the Treatyof Rome. That article makes transitional provisions for ruling on the effect of Article 85 oncertain agreements.

Some additional rules are set out in Schedule 5 on the procedure to be followed for makingnotifications to the Director General for guidance and decisions.

The investigative powers of the Director General of Fair Trading into suspected breaches ofthe Prohibition, and the penalties which may be imposed, are discussed below in Section VI(Part III: Investigation and Enforcement).


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V Part I, Chapter II: Abuse of a dominant position

O, it is excellentTo have a giant's strength! But it is tyrannousTo use it like a giant.

Isabella in Measure for Measure, II ii 107-9

A. Summary

Chapter II repeals the sections of the Competition Act 1980 which deal with anti-competitivepractices and introduces the Bill's second new prohibition, a Prohibition of abuse of adominant position. The Prohibition is intended largely to replace both the existing monopolypowers of the Fair Trading Act 1973 and the anti-competitive provisions of the CompetitionAct 1980. One of the main outstanding issues in the Bill, though, is the extent to which theformer legislation on monopolistic powers will be retained.

B. Limited repeal of the former legislation

The current system adopts what is known as an administrative or investigative approach, asopposed to the proposed alternative system, the prohibition approach. Under a prohibitionsystem, certain practices are specifically prohibited by law (such as the abuse of marketpower) and a system of sanctions is applied whenever such practices are detected. In theadministrative system which the UK currently has, there is no presumption that certainsituations or practices are inherently wrong, but the legislation sets up structures to examinecases of potential concern for harmful effects and to remedy or control them if appropriate.Note that although it is recognised that dominance gives rise to competition concerns, underneither the prohibition nor the administrative systems is dominance judged wrong in itself. Itis the abuse of dominance which is prohibited, or subject to correction.

The present investigative structure relies on the Director General of Fair Trading makingreferences to the Monopolies and Mergers Commission (MMC). In the case of monopolyreferences, MMC reports have to identify first whether and in whose favour a monopolyexists, before investigating whether the monopoly operates (or could be expected to operate)against the public interest. For Competition Act inquiries it has to identify first whether thereis an anti-competitive practice, and then whether it operates against the public interest. TheMMC's report is made to the Secretary of State for Trade and Industry who has the power toaccept, reject or vary the MMC's findings and recommendations to a large extent, although ifno public interest concern is identified, then no further action can be taken.


33

The current system includes powers, after the Secretary of State has received the MMC'sreport, for structural remedies including diversification to be required. There is a distinctionbetween a scale monopoly, where an individual undertaking has at least 25 per cent of thesupply of goods or services of a particular description in the United Kingdom or a part of it,and a complex monopoly, where this market share is held by more than one undertaking andthey act in a way which has the effect of restricting, distorting or preventing competition.

When the Monopolies and Mergers Commission investigates a complex monopoly under theFair Trading Act 1973, it investigates the whole market and can make recommendations toremedy adverse public interest effects. In the August 1997 consultation paper, theGovernment argued that whilst the planned prohibition of abuse of a dominant positionwould be effective against scale monopolies, complex monopolies would still require theinvestigative approach of the Fair Trading Act 1973, which was set up to carry out thecurrent administrative system. This is because whilst the prohibition on restrictive agreementswould catch complex monopolies where the parties were acting under agreement, it wouldnot be effective against complex monopolies where no agreement was in place. (Theprohibition on abuse of a dominant position would only be effective against those parties to acomplex monopoly which are themselves dominant.) It therefore proposed to retain thecurrent powers under the Fair Trading Act 1973.

In the case of scale monopolies, it envisaged that the prohibition of abuse of a dominantposition would be largely effective, but that in exceptional cases there might be a need for theFair Trading Act powers to investigate a repeated infringer of the prohibition, and to makestructural changes.

The National Consumer Council has been critical of the retention of these powers:

What we find hard to understand is why oligopolies should …be treated completely differentlyfrom monopolies. It is suggested that they should be investigated under the provisions of the FairTrading Act, by the Competition Commission and not by the OFT. In NCC's view, this is anonsense. It will serve only to perpetuate all the problems associated with the Fair Trading Actsuch as the lack of meaningful sanctions and penalties, the vagaries in the application of publicinterest criteria used under that Act when considering cases, the lack of transparency, lack of caselaw, and the scope for political interference. We noted earlier that the MMC has always haddifficulty in dealing with complex monopolies. It therefore seems strange to give this task to itssuccessor body, the Competition Commission, which is otherwise going to deal exclusively withmergers, and not to the OFT.35

The CBI also has expressed concern at the retention of some of these powers, and has arguedfor a more limited prohibition of abuse of market power. It notes that the retention of part ofthe current regime together with the new one will make UK firms subject to 'a more extensive

35 Competition Policy Reform, NCC, September 1997, p.21


34

regime for regulating the competitive behaviour of firms than presently exists in the UK oranywhere in Europe or North America'.36

C. The Chapter II Prohibition

Clause 18 states the Chapter II prohibition which controls the abuse of monopolistic ormarket power:

'any conduct on the part of one or more undertakings which amounts to the abuse of a dominantposition is prohibited if it may affect trade within the United Kingdom.'37

The decision to prohibit the abuse of market power signals a break with the previousGovernment's policy, whereas the treatment of restrictive agreements under this Bill wasessentially a continuance of an existing policy. In the August 1996 consultation document,the Conservative Government had re-iterated that whilst it was not implacably opposed to aprohibition of abuse of a dominant position it did not believe that the case for such aprohibition had yet been made.

'…we remain concerned that the risks of inhibiting genuinely competitive behaviour mayoutweigh the potential benefits of greater deterrence that a prohibition system might bring. It isclearly important that we should not introduce a prohibition if its application is uncertain and ifthe uncertainty coupled with potential exposure to penalties and third party claims causescompanies in, or arguably in, a dominant market position to 'aim-off', acting more cautiously. Thiscould damage genuine competition and the exploitation of innovation.'38

The Labour Party's Business Manifesto for the 1997 General Election included a commitmentto introduce a prohibition:

'In reforming competition laws we will introduce a prohibitive approach to provide a strongdeterrent against restrictive agreements and abuses of market power. We will also introduce moreeffective penalties against proven anti-competitive behaviour.'39

As the August 1997 consultation document explained, the prohibition is modelled on Article86 of the Treaty of Rome, which already applies to abuse of market power where there is aneffect on intra-state trade.

36 CBI, September 1997, p. 1037 Clause 1838 Tackling cartels and the abuse of market power, DTI, August 1996 ('Blue Paper')39 Labour's Business Manifesto: Equipping Britain for the future, 1997


35

Article 86 states:

Any abuse by one or more undertakings of a dominant position within the common market or in asubstantial part of it shall be prohibited as incompatible with the common market in so far as itmay affect trade between Member States.

The article goes on to list examples of practices which might constitute such abuse. This iscarried over into the new Bill almost word for word (clause 18):

18(2) Conduct may, in particular, constitute such an abuse if it consists in -

(a) directly or indirectly imposing unfair purchase or selling prices or other unfair trading conditions;(b) limiting production, markets or technical development to the prejudice of consumers;(c) applying dissimilar conditions to equivalent transactions with other trading parties, thereby placing

them at a competitive disadvantage;(d) making the conclusion of contracts subject to acceptance by the other parties of supplementary

obligations which, by their nature or according to commercial usage, have no connection with the

subject of the contracts.40

There are two significant modifications to the European prohibition. The first is that whilstthe European prohibition requires there to be an effect on trade between Member States forthe prohibition to apply, in the Chapter II Prohibition, the conduct is brought within theProhibition if it 'may affect trade within the United Kingdom' (c.18(1)). The second is that theUK Prohibition is potentially local in application, since the 'United Kingdom' is defined asthe 'United Kingdom or any part of it' (c.18(3)).

The Chapter II Prohibition contains fewer exclusions than the prohibition on restrictedagreements, and there is no system of obtaining exemptions (clause 20). As under Chapter I,mergers and concentrations (see Schedule 1) are excluded from consideration under theabuse of dominant position Prohibition in order to allow mergers to be investigated under thespecific merger procedures. Also excluded are services of general economic interest(Schedule 3, para. 4), conduct which is engaged in to comply with a legal requirement(Sched. 3, para. 5), and coal and steel products which are subject to the European Coal andSteel Community Treaty. The Secretary of State may also exclude by order instances whereinternational treaty obligations apply, and cases where there is an overriding public policyneed for an exclusion (Sched. 3, paras 6, 7).

40 Clause 18. A new clause, clause 19, was inserted during the Bill's passage through the House of Lords,which imposes special restrictions on the abuse of a dominant position by a national newspaper. Thisamendment, which the Government does not accept, is discussed in more detail in Section X below.


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It will be possible for businesses to seek advice from the competition authorities on whethertheir conduct may infringe the Chapter II Prohibition. The basic system for obtaining adviceis the same as under Chapter I. Firms will be able to notify the Director General of FairTrading with a view to obtaining either guidance or a formal decision on their conduct.Under clause 21 the Director General is to consider the conduct of persons (which includescompanies) who apply to him. Rules on how such applications are to be considered are setout in Schedule 6. The two types of application have slightly different procedures and conferdifferent benefits.

An application for guidance may be sought under clause 22. The Director General gives theapplicant guidance as to 'whether or not, in his view, the conduct is likely to infringe theChapter II Prohibition'. Where the DG concludes that the Prohibition is not likely to havebeen infringed, he is to take no further action unless he has reasonable grounds for believingthat there has been a material change in circumstances; or that the information on which hebased his guidance was incomplete, false or misleading in a material particular, or he hasreceived a complaint about the conduct (clause 24). Moreover, the DG is not able to impose apenalty on the undertaking whilst the immunity provided by this clause lasts. The immunityis lost if, in the circumstances above, the DG takes further action, and believes that theconduct will infringe the Prohibition, and he gives notice in writing that he is removing theimmunity. Guidance is obtained on a confidential basis, and is founded on information whichis supplied by the party applying for the guidance. Its advantage to an applicant is speed andconfidentiality, but the immunity can be lost if a complaint is received from a third party.Firms which require greater certainty may therefore opt for the alternative procedure, anapplication for a decision.

The process for giving a decision under clause 23 includes information from third parties.Immunity from penalty is not lost after a decision by the receipt of a further complaint, as inthe case of guidance, but this comes at the price of making the conduct publicly known.Where a decision is given that conduct does not infringe the Chapter II Prohibition, the DGcan only re-open the case if he has reasonable grounds for believing that there has been amaterial change in circumstances, or if he has a reasonable suspicion that his decision wasbased on information which is materially misleading, incomplete or false (clause 25).Immunity from penalty is lost if the DG re-opens the case, where he considers that theconduct will infringe the Prohibition, and where he has given written notice of the removal ofthe immunity.

The investigation powers of the DG into suspected breaches of this prohibition, and thepenalties which can be applied, are discussed below in Section VI.


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VI Part I, Chapter III: Investigation and Enforcement

A. Summary

Chapter III of the Bill contains the powers of investigation and enforcement which are usedto make the two Prohibitions effective. The powers of investigation are strong, and allow theDirector General to require the production of documents; to enter premises without a warrant(after giving notice); and to enter premises by force, with a warrant. The use of these powersare, however, accompanied by a number of safeguards. The Bill creates offences forobstructing the DG in carrying out his investigations. Where a Prohibition has been infringed,the DG may give directions to the parties which he considers are appropriate to bring theinfringements to an end. The DG can seek a court order to enforce any direction which hasnot been complied with. Of particular significance though, is the power to impose substantialfines on undertakings which breach the Prohibitions. The financial penalty may be as muchas ten per cent of the undertaking's turnover. Limited immunity from penalties is extended torestrictive agreements and to abusive conduct which is carried out by small firms.

B. Investigations

The Director General of Fair Trading is empowered to conduct an investigation if he has areasonable suspicion that either of the prohibitions has been infringed (clause 26).

Clause 27 gives him powers to require the production of documents which he considers tobe relevant to an investigation. The power is exercised by a written notice which gives detailsof the subject matter and purpose of the investigation, and of the offences which may becommitted by failing to comply with the notice (under clauses 43 to 45). A document may beeither a specific document or a member of a class of documents. The power to requireproduction is backed up by corresponding powers to take copies of documents; to requirepersons (including previous employees) to provide an explanation of the document inquestion; and to require persons to state where a document is, to the best of their belief (c.27(6)).

With written authorisation from the Director General, any of his officers is allowed to enterpremises in connection with an investigation under c.26 (clause 28). This power of entry doesnot require a warrant. If the premises are not occupied by a party to a suspected restrictiveagreement or an undertaking which is suspected of abuse of a dominant position then at leasttwo working days' notice must be given, and the subject matter and purpose of theinvestigation (as well as the offences which may be committed in connection with theinvestigation) must be stated in the notice. These requirements to serve notice on the occupier


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do not apply to a party or undertaking which is under investigation, nor where all reasonablypractical steps have been taken to give notice (c.28(3)). Investigating officers may take anynecessary equipment with them, and can require those on the premises to produce and explaindocuments, to state where a document may be found, take copies from documents, andrequire information from computers to be produced in a legible or removable form (c.28(5)).

A power to entry premises forcibly under warrant may be obtained under clause 29. Thewarrant is to be issued by a High Court judge (or equivalent) rather than a justice of the peaceas originally proposed. This is one of a number of safeguards in this Chapter which wereadded after being raised by the Conservative opposition.41 A warrant may be issued where itis suspected that documents whose production has been required under clauses 27 and 28have not been produced; where there are reasonable grounds for suspecting that if documentswere required to be produced under the Bill's powers, there would be a risk that they wouldbe concealed, removed, tampered with or destroyed; or, where an investigating officer hasbeen unable to gain access to the premises (c.29(1)). The warrant authorises the officer to use'such force as is reasonably necessary' to gain entry, and gives powers to take possession ofdocuments and to take any other steps which appear to be necessary to preserve or protectdocuments. Documents which are taken into possession may be retained for three months,and the premises must be left as secure as when access was gained.

A warrant issued under clause 29 must state the subject matter and purpose of theinvestigation and the possible offences that may be committed as part of the investigation(clause 30). These safeguards were added to the Bill after being raised by the Opposition,who had also wanted other safeguards to be incorporated.42 The powers of entry are to beexercised by producing the warrant. If the premises are unattended, the officer named on thewarrant should take reasonable steps to inform the occupier of the intended entry and givehim or his representatives a reasonable opportunity to be present (c.30(3)). Additionalsafeguards relating to the exercise of powers under clauses 27-29 stipulate that no-one shallbe required by the Bill to produce documents which are privileged (clause 31) and that beforea decision that either of the Prohibitions has been infringed is taken by the Director Generalafter an investigation, he should give written notice to those affected and allow them theopportunity of making representations (clause 32).

The CBI has described the investigatory powers of the draft Bill as excessive, although somechecks and balances were introduced in the Lords:

The powers of investigation are extremely wide and go well beyond those of the EuropeanCommission…..Although a breach of the prohibitions is a civil law offence, we understand thatthe powers go well beyond those of many areas of UK criminal law. We accept that the DGFT

41 Report Stage, HL Deb 19 February 1998 c.335-642 Report Stage, HL Deb 19 February 1998 c.327ff


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should be given stronger powers of investigation than at present in order to enforce theprohibitions but these powers must be proportionate and subject to checks and balances.43

C. Offences

In the course of investigations under clause 26, the investigation officers are required to warnoccupiers of premises of the nature of the offences which exist in relation to the conduct ofinvestigations. The reason for warning occupiers is because those who do not co-operate withcompetition investigations by producing documents and so on face the possibility of beingconvicted of a criminal offence. These offences are set out in clauses 43 - 45. Some of themare subject to defences.

- it is an offence not to comply with a requirement imposed by clauses 27(production of documents), 28 (entry without a warrant) and 29 (entry with awarrant). The offence is subject to a fine of up to £5,000 on summary conviction,or an unlimited fine on indictment (c.43(1)).

- it is an offence intentionally to obstruct an officer exercising powers under clause28 (entry without warrant). The offence is subject to a fine of up to £5,000 onsummary conviction, or an unlimited fine on indictment (c.43(5))

- it is an offence intentionally to obstruct an officer exercising powers under clause29 (entry with warrant). The penalty is a fine of up to £5,000 on a summaryconviction, or, on indictment, up to two years imprisonment and an unlimitedfine, or both (c.43(7)).

- it is an offence to destroy, dispose of, conceal or falsify - either recklessly orintentionally - a document whose production has been required under clauses 27 -29. The penalty is a fine of up to £5,000 on summary conviction, or, onindictment, up to two years imprisonment and an unlimited fine, or both(c.44(1)).

- it is an offence to provide information which is materially false or misleading(either knowingly or recklessly) either to the Director General under Part I of theBill, or to another person in the knowledge that it will be used to provideinformation to the Director General (c.45). The penalty is a fine of up to £5,000on summary conviction, or, on indictment, up to two years imprisonment and anunlimited fine, or both (c.43(7)).

43 CBI response, September 1997


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D. Enforcement

1. Summary

So far we have seen that the Bill sets up two prohibitions on anti-competitive behaviour, andthat in order to determine whether the prohibitions have been breached, the Office of FairTrading has sweeping powers to enter premises and to require the production of documents.These powers are backed up by criminal sanctions. However, since the Bill is intended tofoster competition, it is now necessary to see what powers exist to address anti-competitivebehaviour which has been detected.

The range of powers available to address anti-competitive behaviour which breaches theBill's two prohibitions is formidable. Two are explicitly stated on the face of the Bill. There isa power to levy substantial fines on those who infringe the prohibitions (clause 37). Thispower is directly punitive to the offending party, and should also have a deterrent effect onother undertakings. Then there are powers to issue directions which require offending partiesto amend their conduct. A direction will bring the anti-competitive behaviour to an end.Undertakings can be instructed to alter the terms of a restrictive agreement, or even toterminate it (clause 33). Those whose conduct breaches the Chapter II Prohibition can bedirected to modify or cease their conduct (clause 34). In addition the Bill gives a right to thirdparties to bring civil actions against those who infringe the prohibitions for breach ofstatutory duty. A successful action might lead to damages or an injunction. Although the rightto bring such an action is derived from the Bill, and is an important part of its sanctions, theright is nowhere mentioned in the Bill. Finally, because the Bill does not repeal all of the FairTrading Act 1973, it will still be possible for structural remedies (such as the forced sale ofpart or all of a company) to be imposed as a result of an investigation by the CompetitionCommission (formerly the Monopolies and Mergers Commission) under powers whichalready exist. These current sanctions are intended to be used only as a last resort.

2. Directions

A direction can be issued by the Director General to such person or persons as he considersappropriate requiring them to bring an infringement of either Prohibition to an end.Directions relating to a breach of the Chapter I Prohibition on restrictive agreements are madeunder clause 33. The direction is to be given in writing, and may, among other things, requirethat the parties either modify the agreement or bring it to an end. Where the Director Generalfinds that conduct breaches the Chapter II Prohibition on abuse of a dominant position, underclause 34 he may require among other things that the conduct in question is either modifiedor stopped.


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If his directions are not complied with, the DG can apply for a court order to require theoffending parties to comply with the original direction within a specified time (clause 36).The court order can provide for the defaulter, or an officer of an undertaking who isresponsible for the default, to pay for the costs of obtaining the order.

Since it is possible that damage could result from the continuance of a restrictive agreementor of abusive conduct during the course of an investigation by the Director General, the Billgives the DG powers to impose interim measures (clause 36). To issue interim directions, theDG must have a reasonable suspicion that one of the Prohibitions has been infringed andmust be in the course of conducting an investigation. He must consider that action isnecessary to prevent serious, irreparable damage to a particular person or category of persons,or to protect the public interest. Interim directions can be enforced by the courts in the samemanner as full directions, and they may - on completion of the investigation - be replaced byfull directions under clauses 33 and 34.

3. Fines

Where the DG decides that either prohibition has been breached, the DG has the power tofine the undertaking by up to 10 per cent of its turnover (clause 37). The scale of the fines isan important plank of the Bill, ensuring that the legislation has teeth. The penalty is issuedby written notice, which is to include the date by which the penalty is to be paid. The finesare paid into the Consolidated Fund. Some important details relating to the fines are stillawaited. The basis for assessing the turnover of a firm, to which the maximum level of fine islinked, is to be specified in secondary legislation by the Secretary of State although theGovernment has said that fines will be levied on UK and not worldwide turnover (c.37(7)).The DG is also required to publish guidance on how the fines will be calculated (clause 39).Although the DG may alter the guidance at any time, he must consult appropriately beforeissuing or altering guidance, and the guidance must be approved by the Secretary of State.Where jurisdiction over undertakings is exercised concurrently by the DG and a sectoralutility regulator, then the regulator must be among those consulted by the DG. The guidanceis not a theoretical table: c.39(8) requires the Director General (and on appeal, an appealtribunal of the Competition Commission or the Court of Appeal and its equivalents) to haveregard to the current guidance when setting any penalty.

4. Breach of statutory duty

The Government has always stated that it will be possible for private law actions to bebrought in the ordinary courts against those who have breached the two Prohibitions of thisBill. Such actions would be for the tort of breach of statutory duty. There is, however, no


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explicit reference to this right in the Bill, and only the vaguest reference otherwise, in clause58 which allows findings of fact by the Director General to be relied on in the courts. Thatclause defines 'proceedings' in that clause as meaning proceedings 'which are broughtotherwise than by the Director'. Lord Kingsland attempted on Third Reading in the Lords tohave the right to such an action made explicit. In response, Lord Simon of Highbury stated:

The courts have held that a right of action exists for breach of the ECprohibitions. The same right of action will exist for breach of the UKprohibitions. Clause 58, regarding the use of findings of fact made by thedirector, clearly contemplates such rights of action.

We do not want to go wider or narrower than the rights which exist for breachof the EC prohibitions. We believe that the best way to achieve this result isfor the Bill to remain silent on the issue of private rights of action….

It is already well established under UK law that private parties may seek aninjunction for breach of EC competition law. Clause 58, relating to the use offindings of fact by the director in court proceedings, clearly contemplates suchprivate rights of action for breach of the domestic prohibition. Rights to seekinjunctions will therefore be available for breach of the domestic prohibitions.

Equally it is generally recognised under UK law that breach of the ECprohibitions may entitle third parties suffering loss as a result of the breach toclaim damages.44

5. Small firms: limited exemption

Although the recourse to substantial financial penalties is an important element of the Bill, itis recognised that fines on the scale envisaged could have a devastating effect on small firms.Clauses 40 and 41, therefore, provide small firms with an initial immunity from fines,although the immunity can be withdrawn. Where immunity is to be withdrawn, there areprovisions that the date from which it is to be withdrawn should be set with regard to howlong the parties concerned are likely to require in order to end the infringement. Clause 40refers to a 'small agreement' as an agreement which will enjoy limited immunity fromfinancial penalties for infringing the Chapter I Prohibition. In clause 41 there is a similarcategory of 'conduct of minor significance' in relation to the Chapter II Prohibition. Bothcategories are to be assessed by reference to as yet unspecified prescribed criteria, which theBill says may include criteria related to both turnover and market share. It has beensuggested that the turnover threshold may be set at £20 million.

44 HL Deb 5 March 1998 cc 1325,26


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Even whilst covered by immunity from financial penalty, a small agreement, or conduct ofminor significance, is still exposed to legal sanctions. There is no immunity from third partyactions for breach of statutory duty, for example, which could in theory create significantliabilities, and undertakings covered by limited immunity from fines would still be obliged toobey any directions issued by the Director General.


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VII Part I, Chapter IV: Competition Commission

A. Summary

Chapter IV of Part I of the Bill provides for the dissolution of the Monopolies and MergersCommission (MMC), and its replacement by a new Competition Commission (CC). TheCommission will continue to have responsibility for investigating and reporting on mergerenquiries as it does at the moment. It will also conduct any remaining investigations under theFair Trading Act 1973 on complex or scale monopolies. Such investigations are expected tobe unusual, and would only be carried out where the Office of Fair Trading has already founda breach of the Bill's prohibitions, and where the powers of the Fair Trading Act are thoughtto be more appropriate than those given to the Office of Fair Trading under this Bill. The newCompetition Commission will also act as the appeals body for decisions from the Office ofFair Trading, through its appeal tribunals (clauses 47-50).

B. Structure

The functions of the Monopolies and Mergers Commission are transferred to the CompetitionCommission by clause 46, which also provides for the existence of the Commission, thedissolution of the MMC, and the construal of references to the MMC as references to theCompetition Commission. The CC is to be a corporate body. Detailed rules on its structureare set out in Schedule 7 of the Bill.

The Bill envisages a bifurcated Commission which reflects its twin roles of reporting onmergers and monopolies and of acting as an appeal tribunal for decisions of the DirectorGeneral of Fair Trading. As with the MMC, the Commission's functions will normally beexercised by smaller sub-groups. Members of the Commission are appointed either asreporting panel members, or as appeal panel members. There are in addition specialist panelmembers who fulfil functions under legislation relating to specific sectors. The Commissionwill have a Chairman appointed by the Secretary of State from among the reporting panelmembers, and a President who is appointed by the Secretary of State after consultation withthe Lord Chancellor or the Lord Advocate. The President of the appeal tribunal, and thechairmen of each three person appeal tribunal, are to have specified legal qualifications. TheCommission's members are appointed for terms of up to five years, and may be reappointed.The Commission is to have a Secretary and may appoint such staff as it thinks appropriate.Subject to the stipulations of the Bill and rules made by the Secretary of State in relation tothe appeals function, the Commission has considerable powers to determine its ownprocedures.


45

Initially, the existing members and officeholders of the Monopolies and Mergers Commissionare appointed to the new Competition Commission. The CC is required prepare an annualstatement of accounts and to send copies of the statement to the Secretary of State and theComptroller and Auditor General. The Comptroller then prepares a report on the statement,and both his report and the statement must be laid before parliament (Sched. 7, para.12(3)).Although members of the Competition Commission are appointed to be either reporting panelmembers, specialist panel members or appeal panel members, the Bill allows members to beappointed to more than one type of panel (Sched. 7, para. 2(2)). Some concern was raised inthe Lords that the Bill did not envisage greater separation of the quasi-judicial appealfunctions of the Commission from the reporting role of the Commission. Proposals from theOpposition included formal separation within the same body, the transfer of the remaininginvestigative functions of the Commission to the Office of Fair Trading, and, describedbelow, the institution of a special competition court instead:

Lord Kingsland…The idea that a branch of the High Court should deal withcompetition matters is not a novel one. We have the Restrictive PracticesCourt established in our system. There are three reasons why I believe that abranch of the High Court is better equipped to deal with the tasks of appealthan the appeal tribunal. The first is the new backcloth that competition ruleswill face under the Human Rights Bill, soon to become the Human Rights Act.As I understand it, the fundamental concept that lies behind that legislation isthe concept of rights as entitlements. It is the High Court, and not anysubsidiary tribunal, which has the right to make declarations of incompatibilitywhere statutes fall short of the standards laid down in the Human Rights Act.

It is highly likely that a substantial number of the issues that will have to bedealt with by the competition tribunal will be procedural issues, and henceissues that will raise questions about individual entitlements--for example, aright to a fair hearing or a right not to have too onerous a penalty imposed on acompany. In those circumstances it seems an unnecessary elaboration of thesystem to have to route matters through the tribunal which will ultimately endup in the appeal courts anyway.

The second reason why I believe it appropriate to establish a competition courtto replace the appeals commission is that many of the issues connected withprocedure are just as likely to be raised by applications to the High Court forjudicial review as under appeal to the competition tribunal. In thosecircumstances, in my submission it will lead to confusion to have both theappeals tribunal and the High Court potentially capable of hearing proceduralmatters but leaving it uncertain as to which of the institutions is the moreappropriate.

The third reason why I believe it appropriate to have a competition court isthat the end of the procedure pursued by the Director General of Fair Tradingunder the Bill may be the imposition of a fine or penalty. Those are criminal


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remedies. In those circumstances it is more appropriate for a court of law thanfor a tribunal to hear matters arising from their wrongful imposition.

Those are the three main reasons for my proposing a competition court. Mostof the other amendments in this line of amendments are consequential, saveone. In seeking to replace the competition commission, I have chosen not onlyto seek to replace the appeals tribunal, but also that part of the commissionwhich deals with many matters which are now the responsibility of theMonopolies and Mergers Commission. The reason for that is as follows.

As noble Lords are aware, the Opposition Front Bench has tabled amendmentsto exclude the responsibility for dealing with scale monopolies and structuralmonopolies from the Monopolies and Mergers Commission. Consistent withthat philosophy, all that would be left to the Monopolies and MergersCommission would be its merger responsibilities. In our submission it wouldbe more appropriate that those powers, too, should be dealt with by theDirector General of Fair Trading. That is the reason why the knock-on effectof having the court is the disappearance of the commission itself.45

C. Appeals

Whilst the former MMC has lost much of its routine investigative work to the Office of FairTrading, it has gained an important new role as the first line of appeal against the DirectorGeneral of Fair Trading's decisions. In policing the two prohibitions which the Billintroduces, in granting exemptions from the Chapter I prohibition, in issuing directions forthe future conduct of parties, and in imposing what may be very substantial financialpenalties, the Director General is given powers which have a potentially significant effect onbusinesses which are subject to his jurisdiction. The Bill, therefore, allows his decisions to besubject to an appeal to a newly-constituted body within the Competition Commission, anappeals tribunal. Appeals can also be made by third parties against the DG's decisions,initially to the DG, and then to the Competition Commission. Decisions of the appealstribunal are only appealable on points of law, although the amount of any financial penaltymay also be appealed: appeals are to the Court of Appeal.

Clause 47 allows any person whose agreement or conduct has been subject to a decision bythe Director General to appeal against, or with respect to the decision to the CompetitionCommission. The full list of appealable decisions is listed in c.47(3). Whilst an appeal is inprogress, the original decision continues to take effect with the exception of appeals against

45 Report Stage, HL Deb 19 February 1998 cc 367-68


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the imposition or the amount of a financial penalty (c.47(4). This means that making anappeal will not be a way of buying time.

Clause 48 allows those not directly affected by a decision to make an appeal also. Thesethird party appeals which seek the variation or withdrawal of a decision by the DirectorGeneral are initially made in writing to the DG (c.48(2)). The initial request which must givereasons why the decision should be varied or withdrawn may be made either by an individualor by a representative organisation such as a consumers' organisation or trade body. When theDG receives such a request, he must first decide whether the individual or the organisationhas a sufficient interest in the decision for the application to be considered, and, in the case ofa representative organisation, whether it represents the persons whom it claims to. The DGdeals with the request itself under a procedure which will be set out in rules issued by himunder clause 51. The DG will notify the applicant if he considers that the application has notshown sufficient reason for the decision to be altered or withdrawn. An applicant whoserequest is turned down in this way may then appeal to the Competition Commission (c.48(6)).

Schedule 8 sets out further provisions on appeals, and (under clause 49) provides foradditional rules on the making of appeals to be issued. The scope for rules on the conduct ofappeals is set out in some detail in Part II of Schedule 8; such rules may be made by theSecretary of State after consultation with the President of the Appeals Tribunals and others.Appeals tribunals will determine appeals on the merits of the grounds of appeal which theappellant will set out in a notice of appeal. Decisions of the three person tribunal may bemade on a majority, but the decision must state whether it was made unanimously or not. Thetribunal will issue a statement of the reasons for its decisions. Tribunals have the samepowers to make decisions as the Director General, and may confirm or reverse his decisions;impose, revoke or vary penalties; and issue or alter the terms of individual exemptions. Theycan also refer matters back to the Director General.

Once a decision has been considered by the appeals tribunal of the Commission, there arelimited rights of appeal beyond the Competition Commission to the Court of Appeal (inEngland and Wales) and to its counterparts in Scotland and Northern Ireland (clause 50).Appeals beyond the Competition Commission can normally only be made on a point of lawbut an exception is made for the amount of any financial penalty which can also be taken tothe Court of Appeal. The person making the appeal must show that they have sufficientinterest in the decision and leave to appeal must be obtained. Additional procedural rules onappeals, including setting time limits, may be included in rules made under clause 49.


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VIII Part I, Chapter V: Interpretation and implementation

A. Summary

Chapter V of Part I of the Bill is headed 'Miscellaneous'. The heading perhaps disguises thesignificance of the clauses which fall within the Chapter. Clauses 51 to 53 deal with the issueof rules and guidance by the Director General. These rules and the associated guidance willcover the procedures with which the new powers will be enforced, and give an indication ofhow companies must behave if they are not to infringe the new prohibitions. Rules made bythe Director General will be subject to approval by the Secretary of State, and will beimplemented by order. Among the areas which may be subject to rules is the setting of feesby the Director General. Clause 54 provides that sectoral regulators, such as the gas,electricity and water regulators, will be able to exercise the same powers as the DirectorGeneral under the Bill. This principle is known as concurrency, since the powers strictly areto be exercised concurrently by the Director General of Fair Trading and the variousregulators. Clause 60 is the governing principles clause: it provides that the interpretation ofthe Act is to be carried out wherever possible in accordance with the jurisprudence of theEuropean Community. This clause therefore adopts the competition case law of the Court ofJustice of the European Communities, the competition decisions of the EuropeanCommission and the principles of the EC Treaty to guide the interpretation of the Bill.

B. Rules and guidance

Clauses 51 to 53 require the Director General to produce detailed rules and guidance on howthe powers under the Bill are to be carried out by the Office of Fair Trading. The DG is givenbroad powers to make rules about procedural and other matters 'as he considers appropriate'(clause 51). There are a number of references in the Bill to rules issued under this clause, andit is clear that some of these rules will be very important in determining the practical feel andworkings of the new competition regime. The DG is obliged to consult appropriately whenpreparing rules, and the rules must be approved by the Secretary of State who is able tomodify rules proposed by the DG. The Secretary of State can also revoke or modify ruleswhich are already in force (after consulting the DG), and can direct the DG to make rulesunder the clause on particular matters. An indication of the scope of the rules can be found inSchedule 9 which lists various procedures for which rules may be framed and what mattersthe rules may address. The scope of rules, however, is not limited by the Schedule which iswholly permissive ('rules may make'): c.51(2) also states that the Schedule is 'not to be takenas restricting the Director's powers under this section'.

The Director is required to publish general advice and information about the Bill as soon as isreasonably practical after its passing (clause 52). The guidance is to deal with the application


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and enforcement of the two Prohibitions. The clause requires the advice to aim to explain theprovisions of the Bill to those who will be affected by them and to give an indication of howthe Director expects the provisions to operate. It may include details of the factors which theDG will take into account in exercising his powers. The Director General is required toconsult on these important documents before publishing them, but the approval of theSecretary of State is not required. Where the advice deals with a matter which is also coveredby a sectoral regulator, then the advice may originate from either the regulator or the DG: ineach case, there is an obligation to consult the other.

Some guidance has already been circulated by the Director General in draft form, includingguidance on the main provisions of the Bill and on the question of market definition. Thesedocuments and future consultations can be found on the Office of Fair Trading's internetsite.46

The Director General is given a power to charge fees in connection with the exercise of someof his functions through clause 53. Rules, which would be subject to the approval of theSecretary of State and which would come into force by order, can provide for how such feesare to be calculated and for which of the DG's functions they would be levied.

C. Concurrent powers of regulators

Clause 54 despite its brevity is a very important clause. Together with Schedule 10 it allowsthe sectoral regulators to exercise the functions of the Director General of Fair Trading underPart I of this Bill concurrently with him. This means that most of the powers which the DGFTis given under this Bill can also be used by the sectoral regulators in relation to their sector.Schedule 10 contains the necessary amendments to the respective utility statutes to securethis. This is a complex area where regulatory policy and competition meet, and this sectiononly tries to draw attention to some of the issues at stake.

Although the sectoral regulators already exercise some powers concurrently with the DirectorGeneral of Fair Trading, the clause is controversial. There are two main issues. The firstreflects the greatly strengthened powers which the DGFT receives under the Bill. Some arguethat although those powers may be required by the DGFT it is not appropriate to give thesectoral regulators similar powers. The second concern deals with consistency and fairness.Critics argue that if the prohibitions are to be operated by so many regulatory bodies, there isa danger of inconsistent application of the law by regulators or of overlapping jurisdictions.

46 http://www.oft.gov.uk/html/new/guides.htm#consult


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The concurrent powers are exercised, in relation to their own sectors, by the Director Generalof Telecommunications, the Director General of Electricity Supply, the Director General ofElectricity Supply for Northern Ireland, the Director General of Water Services, the RailRegulator, the Director General of Gas Supply, and the Director General of Gas Supply forNorthern Ireland. Schedule 10 contains corresponding amendments to the various regulatorystatutes for each of these regulators.

Lord Simon of Highbury explained the rationale for allowing regulators to operate powersconcurrently during the Committee Stage in the Lords:

This subject is sufficiently important for me to set out a little more backgroundabout the issue of general competition. Whatever the merits of the originalprivatisations and their structures, strong sector regulation has played a majorpart in securing consumer benefits in the regulated sectors. That has beenpossible only because the sectoral regulators have had the powers they need todo the job: to regulate in order to protect the consumer now; and, wherefeasible, to promote competition in order to protect the consumer in the future.It is implicitly recognised in the privatisation statutes through a duty on thesectoral regulators to promote or facilitate competition. That is the generalissue.

Consequently, there is no clear distinction between sectoral regulation and thepromotion of competition in those sectors. The one merges seamlessly into theother and the sectoral regulators are drawn inevitably into competition issues.That is reflected in the regulators' responsibilities to enforce certain licenceconditions which are aimed at market power issues. For example, there arelicence conditions concerning price caps and prohibiting undue discrimination.

It is reflected also in the concurrent functions conferred on the sectoralregulators under certain aspects of general competition law; namely, themonopoly provisions of the Fair Trading Act 1973 and the provisions of theCompetition Act 1980 which relate to the control of anti-competitive practiceswhich this Bill repeals. Clarity about the responsibility for applying thelegislation in the sectors--ensuring no regulatory gap or overlap--has beenachieved through bilateral "concordats" or understandings between most of thesectoral regulators and the Director General of Fair Trading, by which thesectoral regulators are responsible for the application of the relevantprovisions of general competition law within their own sectors.

In the Government's view, and that of the regulators, the availability of thosepowers has been an important fall-back which has added to the credibility andtherefore to the effectiveness of the regulators. One remembers the example ofPresident Teddy Roosevelt who extolled the virtues of speaking softly whilecarrying a big stick. Indeed, that may have been the impression which thenoble and learned Lord, Lord Fraser, had of Clare Spottiswoode. He did not


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use those words but she does indeed speak softly. The sectoral regulators'general competition functions are indeed a stick without which they would beseverely hampered.

Let us now deal with the question of consistency. I would echo many of thestatements made by Members of the Committee that consistency is importantin the issue. It is part of the debate when it is asked why we cannot achievemore consistency by lumping everything together and having one personinvolved. That may indeed be--I hate to say it--the nirvana of the noble Lord,Lord Desai. We may reach the position of having an over-arching great powerwhich is all-seeing and all-powerful; but we are not there yet. These aredynamic and changing markets. I never hesitate to remind the Committee thatI have come lately from a field in which I was able to observe those marketsdeveloping in extraordinary ways. In my view, to try to have an overarchingcapacity to master all those specialties in one fell swoop is not credible yet.One day I may stand at this Dispatch Box, if I am a lucky and privileged man,and be able to say that an overarching structure is desirable, but I do not see ityet.

But in terms of the ability to promote an answer to questions on consistency, Isay to the Committee that there is already a systematic body of law with whichthe regulators must ensure that they do not act inconsistently. Consistency inthe applications of the prohibitions by regulators is thus built in from theoutset. It will be supported by a single set of procedural rules to be drawn upby the director general and by a process for the director general and thesectoral regulators to work together. As my noble friend Lord Borrie hasalready emphasised, they are already setting up the working group. Indeveloping advice and information about the application and enforcement ofthe prohibitions, we shall gain more insight into the developing capacity toachieve consistency. The tribunal will also have an important role as allappeals from directors and regulators' decisions will end up there.

In saying that there will be consultation between the regulators and thedirector general on cases where concurrency is an issue, I do not believe that Iam minimising the importance of the informal debate. It may not be a lunch ordinner table; indeed, it may be something as boring as a meeting room. Butthere must be an informal capacity for concurrency to be dealt with. As hasalready been intimated by the noble and learned Lord, Lord Fraser ofCarmyllie, there is already a requirement under each of the utility statutes thatthere must be only one way to apply and follow-up a dispute. There cannot beoverlap and two cases running at the same time. The noble and learned Lordpointed out that that was the case in the gas regime. It is true of all regimes.That is a protection.

Furthermore, I have already indicated (on 17th November at col. 415) that Iwould reflect on whether an amendment to the Bill may be needed to provide


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flexibility for a regulator and the director general to work together oninvestigations where both agree that that would be helpful. I very much takethe point made by the noble Lord, Lord Ezra, about the widening of the scopeof companies where two or three utility sectors may be in the ownership, insome form, of one company structure--a conglomerate of utilities. I do notbelieve that the Bill would rule out action by the director general, no doubt inthe light of agreement between the director general and the regulator orregulators concerned that action would be taken at the level of the directorgeneral rather than of one of the utility regulators or three of the utilityregulators. There is nothing in the Bill which would prevent the process ofinformal consultation.

Therefore, in the developing process of consistency, by way of advice,procedures and rules, I believe that we will understand better how there is adevelopment of the ability of the director general and the sectoral regulatorsboth to co-ordinate their capacities to understand and, at the same time, theirindividual ability to act. As I said, there is already a great deal in the body ofthe law to ensure that they do not act inconsistently.…….

There are two central points that I commend to Members of the Committee.First, not conferring concurrent functions in relation to the prohibitions wouldbe a major policy change which would inevitably weaken the roles of thesectoral regulators at this time. Secondly, conferring concurrent functionswould enable the sectoral regulators' specialist expertise and knowledge oftheir sectors to be directly tapped as the key asset in applying the prohibitionsleading at this stage to a better quality of sectoral regulation all round.47

His defence of the Government's position was not acceptable to the Opposition and severalamendments were tabled at Report Stage to try to eliminate, subordinate or narrow the role ofthe regulators in operating competition law controls or powers. One external critic, who wasalso quoted in the House, challenged the main points raised by Lord Simon, and argued thatthe Bill would lead to a duplication of scarce resources:

The problem is that the Government is not contemplating one investigatoryand enforcement body, but eight. Under the Act, in addition to the DGFT, allthe regulators, including those - where relevant - for Northern Ireland, fortelecommunications, electricity, water, rail and gas will have 'concurrent'powers. This means that each of them, in addition to his or her central role inensuring that each company obeys the terms of its licence, will be able to

47 HC Deb 25 November 1998 cc 914-17


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investigate, enforce and fine companies within their sector of responsibilityunder the new Act.

This proposal was rightly criticised in the Lords debate in November and willbe the subject of spirited attempts to change it this evening. As it stands, theBill will lead to duplication of scarce resources among regulators; the certaintyof inconsistency of treatment between regulators and difficulties over whichregulator should have jurisdiction in any situation. These problems will getworse as technologies converge to smudge sectors' borders, or where utilitiesdiversify into unregulated businesses, or where agreements involve two ormore regulated sectors or where a company is regulated by more than oneregulator, like United Utilities or Hyder.

The position is made even worse because the regulators' powers under the newAct must be exercised in a manner that furthers the regulators' differentspecific statutory objectives as well as competition. So, for example, intelecommunications, this includes the universal service obligation, the positionof the disabled and pensioners, the promotion of inward investment, overseascompetitiveness, and other factors that are both specific to telecommunicationsand irrelevant to the assessment of competition. Not only will the tribunalhave to master the statutory objectives of each regulator, but the statedobjective of consistency with EU competition law will become virtuallyimpossible to achieve.48

D. Governing principles: EC law

Clause 60 is another of the Bill's most important clauses. Subsection (1) states that the clauseaims to ensure that competition questions under the Bill are dealt with in accordance withEuropean Community competition law so far as is possible. The Bill itself is closelymodelled on the competition articles of the Treaty of Rome, and to a very great extent adoptsthe wording of those articles verbatim. One of the reasons for so doing is to align the UKcompetition regime as closely as possible with that of the EC. Companies which are subjectto both the EC regime and the national regime will face less of a compliance burden since ineffect they will be adhering to a single, consistent competition regime, whether they aretrading within the UK or across national boundaries.

The effect of this clause is to import European jurisprudence on competition, which is well-developed, into UK law. The courts and appeal tribunals and the Director General and theother regulators are all required to interpret the Bill in a manner consistent with the principles

48 Thomas Sharpe QC, 'Dangers in giving regulators a role as competition police', The Times, 23 February1998


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which have been laid down by the Treaty of Rome and the European Court. In other words,the past decisions of the European Court become a ready-made body of case law to assist indetermining the provisions of the new Bill. For example, such crucial questions as what adominant position consists of will be answered by reference to decisions on that questionover the years in the European Court of Justice rather than by reference to a definition in theBill itself, or to judicial decisions in the UK courts as and when cases are brought. The newBill is not identical in every respect to the European provisions: this is allowed for in thegoverning principles clause which requires consistency to be maintained so far as is possible,having regard to any relevant differences between the respective laws.

Despite the care taken to align the Bill closely with the European approach, one obviousdifference is the purpose of the respective laws. The EC's competition regime is in large partintended to underpin the achievement of the single market in goods and services, but that isnot an issue for domestic competition policy. This may mean that some EC jurisprudencewhich is well-established may not in fact necessarily apply to interpreting some areas of theUK Bill because those decisions were decided on single market grounds. Ultimately, suchproblems of interpretation are a matter for the appeals tribunals and for the Court of Appeal,although the Director General's published guidance will give a more immediate indication ofhow the rules are to be interpreted in the UK.

Much of the initial application of competition law is carried out by the EuropeanCommission, its decisions then being subject to appeal at the Court of First Instance and theEuropean Court of Justice. The courts are to consider decisions by the Commission also wheninterpreting the Bill, but unlike the requirement to ensure consistency between the principlesand decisions of the Treaty and the European Court, there is a lesser obligation to 'haveregard' to relevant statements and decisions by the European Commission.

E. Miscellaneous provisions

Clause 55 imposes limits on the disclosure of information which has been obtained underPart I. Generally information which relates to the affairs of an individual or a particularbusiness cannot be disclosed without the permission of the person from whom theinformation was obtained, and, if different, the permission of the person to whom theinformation relates. There are exceptions for disclosure in relation to legal proceedings, andCommunity obligations. Schedule 11 contains a list of designated persons and designatedfunctions: the performance of those functions by those persons is also not covered by thedisclosure restrictions. The list covers functions under regulatory and some consumerstatutes. Where disclosure of information is contemplated, clause 56 requires the Secretary ofState and the Director General to consider whether such disclosure would be against thepublic interest, and to balance the need for disclosure against the private and legitimatebusiness interests of those concerned.


55

The Director General's functions under the Act are protected by absolute privilege againstdefamation claims (clause 57). This means that no action for libel can be brought against theDirector on the basis of anything which he says as part of his functions under the Act ingiving advice, guidance, a notice, a direction or a decision. Under clause 58 a finding of factby the DG can normally be relied on in civil proceedings, unless the court directs otherwise.This provision is relevant to cases brought by third parties for a breach of the Bill'sProhibitions, and means that those who are bringing actions for breach of statutory duty in thecivil courts will not normally need to re-establish facts which have already been establishedby the Director General.


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IX The rest of the Bill

A. Part II: Assisting European investigations

Although the Bill introduces a national competition regime in the UK which is based onEuropean competition law, it is important to remember that European competition law willcontinue to apply in the UK in relation to abuses of a dominant position or to restrictiveagreements which have an effect on trade between Member States. Part I of the Bill wasconcerned with aligning the national competition regime with the European regime. Part IIof the Bill in a small way aligns the European regime with the national regime, by makingavailable for investigations under the European regime some of the investigative powerswhich the Director General has in relation to national competition investigations.

Lord Simon of Highbury explained the rationale for this change in the Lords on SecondReading:

….we believe that as a matter of equivalence of procedures the procedure forobtaining warrants authorising forcible entry and search in the UK in relationto EC competition investigations should be similar to that which is providedfor in respect of domestic competition investigations, with variations reflectingonly the different nature of the investigation at issue. This makes bothadministrative and regulatory sense. The DGFT would therefore be givenpowers to enter premises under a warrant, by force if necessary, in certainspecified circumstances in connection with an investigation under Articles 85and 86 of the EC Treaty.49

Under clause 62 the Director General or his agent may apply to the High Court for a warrantto enter and search premises, using reasonable force, where in the course of a formalCommission investigation that investigation has been obstructed or is likely to be obstructed.The type of obstruction envisaged includes where a Commission official has not been able togain entry to premises, or where material has not been produced as required, or where thereare reasonable grounds for suspecting that material would be interfered with if its productionwere to be required. Similar powers are available to the Director General under clause 63 inless formal enquiries where the Director General is acting on the request of the Commissionin connection with one of its enquiries. The warrants last for one month and are subject tovarious safeguards in their use, including an obligation under clause 64 to indicate the subjectmatter and purpose of the investigation on the warrant, and a warning of the offence which

49 HL Deb 30 October 1997 c1147


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may be committed by obstructing officers who are in possession of a warrant. The offence iscreated by clause 65: it is an offence intentionally to obstruct a person in exercise of powersunder a warrant issued under clauses 62 and 63. The offence carries a penalty of a fine of upto £5,000 on summary conviction, or, on conviction on indictment, an unlimited fine or up totwo years imprisonment (or both).

B. Part III: Monopolies

Part III of the Bill amends the Fair Trading Act 1973 to strengthen the investigative powersof the Director General of Fair Trading against monopolies. These powers are not expected tobe widely used. Under the Bill the normal route for controlling monopoly power will bethrough the Chapter II Prohibition on the abuse of a dominant position and not those underthe 1973 Act. However, the government has decided to retain the monopoly powers it used toexercise under the Fair Trading Act 1973 as a reserve line of protection for cases which havenot been resoluble through the new regime. The 1973 powers, put simply, are potentiallymore wide-reaching since they permit structural solutions such as divestment, although themechanism for applying these sanctions is fairly slow and cumbersome.

The clauses of Part III, therefore, have a curious status in this Bill. They toughen theinvestigative powers of the Director General under the current competition regime, but theyappear in a statute which also gives him strong powers under a new competition regimewhich is largely to replace the current one. Clause 66 strengthens the DG's powers to seekinformation in connection with making a monopoly reference under the 1973 Act, or withseeking undertakings as an alternative to a monopoly reference. The powers are similar tothose which the DG has under the rest of the new Bill: he is to be able to require theproduction of documents and business information by written notice, and he is also to begiven a right of entry to premises and to require there the production and explanation ofdocuments. Clause 67 amends s.46 of the 1973 Act to make the penalties for not complyingwith requests for information more punitive. Under s.46 it was an offence to refuse orwilfully to neglect to furnish information as required by the Director General: the penalty wasa fine of up to £5,000. The clause creates offences of not complying with the informationrequirements of the DG, of interfering with documents whose production has been required,and of wilfully obstructing the DG in the exercise of his powers. Some defences are created,but the offences can be tried either way, and on indictment now carry maximum penalties oftwo years imprisonment and an unlimited fine for the first two offences, and of an unlimitedfine for the wilful obstruction offence.

Clause 68, in the words of the Bill's explanatory memorandum, 'enables services whichconsist in the making of arrangements in connection with the use of land to be made subjectto the monopoly provisions of the Fair Trading Act 1973'. The clause amends s.137 of the1973 Act to this effect.


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C. Part IV: Supplemental and transitional

Part IV of the Bill contains supplemental and transitional measures. Clause 69 repealssections 44 and 45 of the Patents Act 1977, which relate to restrictive conditions in contractsdealing with patented products. Clause 70 sets the order-making powers of the Bill. Powersto make regulations and orders under the Bill, and the power to make rules under c.49 (onappeals and the appeal tribunals) are exercisable by statutory instrument. Most are subject tothe negative procedure, but orders relating to the exclusion of agreements from the Chapter IProhibition (c.3), the exclusion of cases from the Chapter II Prohibition on abuse of adominant position (c.20), the calculation of fines relating to turnover (c.37(7)) and theremoval of professional rules from the designated list (Sched. 4, para. 6(3)) must beapproved by a resolution of each House. Clause 71 provides that individual officers of acompany may be guilty of certain offences under the Act if it is shown that the offence wascommitted with their consent and connivance, or because of their neglect. Clause 72 dealswith the Bill's application to the Crown. Clause 73 introduces the amendments, transitionalarrangements and repeals of Schedules 12, 13 and 14. Clause 74 allows the Secretary of Stateto make additional transitional, incidental, consequential and supplemental provisions byorder if he deems it necessary. Clause 75 provides that the Bill may be cited as theCompetition Act 1998; that most of its provisions will come into force by order; and that itwill extend to Northern Ireland.


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X Specific issues

A. Predatory pricing

1. Introduction

Predatory pricing is an anti-competitive practice, covered by the Competition Act 1980. Thereis a fine line between competition, which is expected to yield benefits for consumersnormally by fostering lower prices or better service, and unfair competition, where marketstrategies are pursued which are detrimental to the interests of consumers, and whichtypically lead to higher prices. Concerns over the adequacy of predatory pricing controls wereraised in the Lords primarily in connection with newspaper prices. The Government wasdefeated on this issue, and the Bill now contains a press diversity prohibition whichprohibits conduct (by those with a substantial degree of market power in the nationalnewspaper market) which might reduce the diversity of the press by harming competition inthe market (clause 19).50 The Government does not appear to support the clause's retention:in a written answer to Norman Baker MP, the Prime Minister wrote:

The new clause added to the Bill in the House of Lords is unnecessary becausethe Competition Bill already contains a prohibition of abuse of dominancewhich will apply across the economy and newspapers will not be exempt.51

2. Current UK system

Under the current UK system, predatory pricing can be addressed under either theCompetition Act 1980 or the Fair Trading Act 1973.

The Competition Act 1980 allows an investigation and intervention by the authorities where aperson pursues a course of conduct which has the effect of restricting, distorting orpreventing competition in the supply of goods or services in the UK. Action is taken if thepractice is found to operate against the public interest. There is a de minimis/ market sharethreshold. Companies are excluded from the Act if they have a turnover of less than £10million, or a market share of less than 25 per cent of the relevant market. The DirectorGeneral defines what the relevant market is. Most of the Competition Act 1980 is to berepealed.

50 HL Deb 9 February 1998 cc 913-93551 HC Deb 7 April 1998 c.142w


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The Fair Trading Act 1973 powers are based on monopolistic dominance. Action can betaken against companies which individually or acting together control 25 per cent or more ofthe market for goods or services of any particular type in the UK. Once the threshold hasbeen satisfied, the decision on whether to take action is based on public interest grounds. TheGovernment intends to retain the Fair Trading Act 1973 powers as a fall-back remedy incertain market situations or to address persistent offenders.

Predatory pricing as a concept tests the boundaries between fair and unfair competition, sincekeen prices in a competitive market are normally thought to be a goal of competition policyrather than something to be prevented. It is recognised though that some price reductions canhave an anti-competitive effect in the medium and long term despite the apparent short-termattractions of the low prices. The Office of Fair Trading has in the past defined this harmfulform of price competition, predatory pricing, in the following terms:

"the acceptance of losses in a particular market which are deliberately incurredin order to eliminate a specific competitor, so that supra-normal profits can beearned in the future, either in the same or in other markets".52

The idea is that this form of price competition is only viable for the price-cutter if it succeedsin eliminating a targeted competitor from the market. The surviving company can then, sothe theory goes, raise its prices perhaps to uncompetitively high rates and in the absence ofcompetition make higher profits than would normally be expected. For such a scenario toapply, it is usually necessary for there to be significant barriers to entry in the market,otherwise new competitors would be attracted into the market and would threaten thesurviving company's ability to make supra-normal profits.

The Office of Fair Trading has applied these criteria strictly, and there are examples of pricecompetition which have been widely described as "predatory" which have not satisfied theOFT's terms. For example, the OFT was not persuaded that a round of newspaper price cutswere predatory (when The Times and the Daily Telegraph in 1994 cut their cover pricesdrastically in a move which was interpreted by some as an attempt to force the troubledIndependent out of the market).

3. New UK regime

The UK regime will change under the Bill. To replace the current regime, which is based onthresholds which permit an investigation, and is then determined on public interest grounds,

52 Thamesway Limited, 1993, para 8.4


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the new Bill applies Article 86 of the Treaty of Rome. This provision already applies to abuseof market power where there is an effect on intra state trade between EU Member States.

The wording is incorporated into clause 18 of the Competition Bill 1997-98 (HL). This iswhat is known as the Chapter II prohibition. It prohibits conduct which amounts to the abuseof a dominant position. It is specifically applied to conduct which directly or indirectlyimposes unfair purchase or selling prices or other unfair trading conditions (c.18(2)(a)). TheGovernment has argued that this specifically gives a power to take action against predatorypricing.

Lord Simon of Highbury : I respond immediately to the invitation offered tome by the noble and learned Lord, Lord Fraser of Carmyllie, as to whether theBill covers predatory pricing. Clause 18(2)(a) refers to:

‘directly or indirectly imposing unfair purchase or selling prices or otherunfair trading conditions’.

That constitutes one of the key elements in judging an abuse. Therefore, wehave no doubt in our minds that that is clearly covered.53

The phrase quoted by Lord Simon also appears in Article 86, and there is no doubt thatpredatory pricing is already covered by the EU competition regime. Under this Bill thejurisprudence of decisions by the European Court of Justice and the Commission would beincorporated into UK law. Sweet & Maxwell's Encyclopedia of Competition Law says (at 1-416):

It is now firmly established that predatory pricing is unlawful under Article 86of the Treaty of Rome. In AZCO v Commission ECS, a supplier of flouradditives, took the decision to begin production of plastics. AZCO was anestablished supplier of both products, and the Commission concluded that thedominant firm had adopted a series of tactics deliberately aimed at stifling theactivities of its only real competitor. The ECJ in Tetra Pak laid down the legaltest for predatory pricing as follows:

(a) Where an undertaking fixes its prices at a level below average variablecost, it is to be conclusively presumed that the undertaking's purposewas to harm its competitors.

(b) Where an undertaking fixes its prices at a level above average variablecost but below average total cost, its conduct is to be regarded as

53 Report Stage, Government response to Amendment 24, HL Deb 9 February 1998 c931


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predatory only where there is independent evidence that the purpose ofthe conduct was to harm competitors - such evidence may take theform of correspondence, informal memoranda, etc.'

There is a substantial body of case law on the interpretation of dominance under EC law.54

The tests are fundamentally economic, and can be crudely divided into two questions, what isthe market in question over which dominance might exist?, and, does the firm have marketpower or dominance in that market? There is considerable scope for arguing about how amarket should be defined, and this is frequently a feature of EC competition cases. On thequestion of what constitutes dominance, one legal test is whether the company enjoyseconomic strength which enables it to prevent effective competition through its power tobehave independently to an appreciable extent of its competitors, customers and consumers.55

Richard Whish notes:

‘The Commission has said that it takes the view that a dominant position cangenerally be taken to exist when a firm has a market share of 40 – 45 % andeven that one cannot be ruled out in the region of 20 – 40 %. It concedes thatthese shares would not automatically indicate dominance and that other factorswould have to be taken into account, but this is an important pointer to theCommission’s likely attitude to the question of dominance.’56

The supporters of clause 19 in the Lords were critical of the pricing policy of The Times inthe broadsheet sector. For the period October 1997 to March 1998, The Times and the Sunhad a 33 per cent share of the market for daily national newspapers, and The Times had ashare of 28 per cent of the market for daily broadsheets.57

B. Medicaments and price maintenance

1. Price maintenance

Over the counter medicines - or medicaments - are the last product category for which resaleprice maintenance is legal in the UK, thanks to an exemption from current competition lawwhich dates back to 1970. Moves are in progress to remove this exemption by having thecase referred back to the Restrictive Practices Court. Some feel that the new Competition Billshould be amended to safeguard price maintenance for medicaments, or at least to moderate

54 It is worth noting that although dominance is not a specific criterion of the current UK regime, the presenceof market power has always been a key feature of applying this regime in practice.

55 United Brands v Commission, Case 27/76 [1978] ECR 20756 Competition Law (1993) p.263.57 Source: ABC Monthly circulation figures report, based on net circulation


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the impact of competition investigations in this market during the transition to a new regime.The Government was defeated on this issue in the Lords (see below).

Community pharmacists argue that price maintenance on medicaments provides a vitalsubsidy to their businesses and helps ensure that pharmacies are available throughout thecountry to meet local medical needs. There have been warnings that if groups like the largesupermarkets compete in these markets on price, many local pharmacies will have to close.One supermarket, ASDA, has tried to cut prices on medicaments on at least two occasions,but manufacturers have responded with injunctions preventing them from doing so.58

2. Resale Prices Act 1976

Under the Resale Prices Act 1976, it is illegal for manufacturers or suppliers to seek toenforce a minimum selling price for their goods either collectively or through individualagreements. It is, however, possible for an exemption from the Act to be granted by a specialcourt, the Restrictive Practices Court. There are a number of criteria which allow the Court togrant an exemption but the overriding theme is one of the balance of public interest; that:

'the resulting detriment to the public as consumers or users of the goods inquestion [of not allowing maintained minimum prices] would outweigh anydetriment to them…(whether by the restriction of competition or otherwise)resulting from the maintenance of minimum resale prices in respect of thegoods'.59

In practice very few exemptions were ever made to allow price maintenance. One exemption- that of net books - was removed in March 1997. That leaves the exemption for certain typesof medicines. Although prescription medicines were once exempted, price maintenance nolonger exists in that market, and it is only in the sale of over the counter medicines('medicaments') that resale price maintenance is still legally enforced in the UK.

The exemption was originally granted in 1970 by the Restrictive Practices Court. The Courtis able under s.17 of the Act to revoke an exemption order, but an application for it to do thishas to show 'prima facie evidence of a material change in the relevant circumstances since theCourt's last decision in respect of the goods in question'.

58 'CPAG attacks Asda's "ruthless cynicism"', Pharmaceutical Journal, 1 November 199759 S.14


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3. Office of Fair Trading scrutiny

In July 1996, the Director General of Fair Trading published a review of the medicamentsmarket; in October 1996 he announced that he would in the light of the review be startinglegal action to end the price exemption for medicaments. The Office of Fair Trading's AnnualReport 1996 mentions a number of changes to the market for medicaments since 1970 whichit believes are relevant, and which would presumably be evidence which could potentially besubmitted to the Court to back up a call for an end to the exemption. The OFT noted, forinstance, that numbers of chemists were no longer falling and had stabilised; that chemistsderived a higher proportion of their turnover now from prescription drugs (70 per cent) thanin 1970 (50 per cent); and that products on which supermarkets could compete on price hadfallen from 7 - 10 per cent in 1970 to 3 - 4 per cent. The OFT thought that claims that manychemists would face closure if the exemption was removed were exaggerated.

4. Competition Bill

The Competition Bill [HL] would repeal the Resale Prices Act 1976 in its entirety. In itsplace would come a prohibition on agreements which affect trade within the United Kingdomand which may prevent, restrict or distort competition there.

The Act clearly intends price fixing agreements to be caught by the prohibition. Clause2(2)(a) specifically includes amongst 'prohibited agreements', agreements decisions orpractices which 'directly or indirectly fix purchase or selling prices or any other tradingconditions'.

It will be possible for exemptions to be granted from the prohibition. The domesticexemption is available for agreements which improve production or distribution or promotetechnical or economic progress, whilst nevertheless allowing consumers a fair share of theresulting benefit (clause 9). So-called parallel exemptions, broadly speaking, allow ECexemptions to apply in the UK also. Thus it is a possibility that medicaments might be able toqualify for an exemption from the new prohibition whatever the result in the RestrictivePractices Court. The DTI has commissioned a study of the criteria used for grantingexemptions by the EC. Although it contains a section on 'benefits to health' as an exemptioncriterion, there seems to be no direct parallel to the kind of exemption sought formedicaments.60


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The Bill also provides for transitional periods to allow firms to adjust to the changed rules. Aconsultation paper issued in August 1997 with a draft version of the Bill discussed theposition of cases which are before the current Restrictive Practices Court or which enjoyexemptions under the current legislation:

10.5 There are arguments to justify a longer transitional period in certain caseswhere regulatory scrutiny has already taken place. In particular, a longertransitional period could be justified for agreements explicitly sanctioned by theRestrictive Practices Court (RPC) under either the [Restrictive Trade PracticesAct] or the [Resale Prices Act] in recognition of the fact that the arrangementshave already been investigated and favourably assessed against public interestcriteria. This is the position in respect of resale price maintenance in “over thecounter medicines”. Here the [Director General of Fair Trading] has indicatedthat he may seek leave to refer the matter back to the RPC for consideration. Wedo not believe it would be appropriate for new legislation to cut across such aprocess. The right course would be to enable proceedings, if commenced, to befollowed through to a conclusion. If resale price maintenance in over-the-countermedicines was still found to be in the public interest, the prohibition would bedisapplied for a transitional period of five years following the end of the RPCproceedings.61

The position under the Act prior to Third Reading was that if the exemption of medicamentsfrom resale price maintenance law had been referred to the Court (but not adjudicated on) atthe time the new prohibition came into force, then the prohibition would not apply to it untilthe case was resolved. If the Court found in favour of the exemption, then for a transitionalperiod of five years the prohibition would not apply to medicaments. If, however, resale pricemaintenance were found by the Court to be against the public interest, then no transitionperiod would apply once the prohibition has come into force.

5. The Bill in the Lords

The treatment of medicaments was been debated several times in the Lords. The Minister forTrade and Competitiveness in Europe, Lord Simon of Highbury, was initially sympathetic intone to an amendment from Lord Graham of Edmonton which called for medicinal productsto be specifically excluded from the prohibition in the Bill.62 A number of other peers spokein favour of the amendment, but whilst the Government has indicated that it does not wish thesale of medicaments to be treated unfairly by the complex transition arrangements, there islittle sign that it will accede to the main demand, that it exclude price maintenance of

60 'Exemption criteria under Article 85(3) EC: a study of the case-law of the European Court of Justice, the

Court of First Instance and the decisional practice of the European Commission', Professor Richard Whish61 A prohibition approach to anti-competitive agreements and abuse of dominant position: Draft Bill, August

199762 HL Deb 13 November 1997 c.269


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medicaments from the new legislation.63 At Third Reading, moreover, the Government wasdefeated on the issue of 'double jeopardy' in relation to medicaments.64 The potential doublejeopardy arises, it is argued, from the prospect that the resale price issue for medicaments willbe examined under both the current legislation and then the new. The Government argues thatit has sought to minimise this risk and that what proposers of the amendment would achievewould be to prevent the issue from even being examined under established legal proceduresuntil 2004. The amendment was passed, however, by 138 votes to 81, and currently is part ofthe Bill.

The Director General of Fair Trading referred the pharmaceuticals case to the RestrictivePractices Court on 8 January 1998, as the culmination of a longer term investigation by theOFT.65 Whilst one would not wish to prejudge the case, the fact that the Director General ofFair Trading believes - after research - that the exemption should be ended, and that the onlyother price maintenance agreement in existence was struck down by the Court last year,arguably makes the continuance of this exemption on competition grounds look doubtful.Others argue, though, that the issue needs to be seen in the wider context of health policyaims to encourage community pharmacies by ensuring that they receive adequate funding. Inresponse, it has been suggested that such aims should be achieved through the NHS itself andnot through an exemption founded in competition law.

6. Remunerating pharmacies

All pharmacists dispensing prescription drugs receive income from the NHS, in that they arepaid a dispensing fee for every drug dispensed.66 Currently, this is paid at a rate of 94.1p perprescription.67 Pharmacies who dispense between 1,100 and 1,600 prescriptions per monthand meet a number of other requirements such as displaying health promotion leaflets andkeeping patient medication records are also entitled to an allowance for "additionalprofessional services" of between £755 and £1380 per month, depending on the number ofprescriptions dispensed. Both forms of payment will apply equally to large supermarketchains as they do to smaller privately-owned high street or rural pharmacies.

There is also a form of NHS subsidy for smaller, more remote pharmacies known as the"essential small pharmacies scheme": pharmacies dispensing fewer than 19,020 prescriptionsper year and situated more than 1 km by the nearest practicable route from the next pharmacyreceive an extra payment to enable them to remain in business. This payment is worked outby calculating how much income the pharmacist has actually received in NHS dispensing and

63 HL Deb 25 November 1997 cc 978-98764 Amendment 1, Third Reading, HL Deb 5 March 1998 c1301-1965 'Pharmaceuticals case referred to court', OFT release 1/98, 8 January 199866 This section was contributed by Katharine Wright of the Social Policy Section.67 Dept of Health, Drug Tariff, January 1998


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additional professional fees, and then making this up to a target payment, currently £35,480per year. As the conditions of the scheme suggest, this scheme is aimed primarily at remoteror rural pharmacies rather than at small high street stores which are unlikely to be 1km awayfrom another pharmacy.

C. Lookalikes

Manufacturers of branded products maintain that the law provides inadequate protection tothem over what they term the unfair competition they face from lookalike or copycatproducts. The issue of lookalikes was raised on more than one occasion in the Lords.Proposing amendments which would have given strong powers for brandholders to protecttheir products from lookalikes, Lord McNally argued:

The grievance remains about lookalike products and in proposing theamendments it is my intention to suggest to Ministers that those grievances arelegitimate and that the Bill is an appropriate opportunity to right the wrongsdone by lookalikes.

Lookalike products trade parasitically by mimicking the package of brands.They use the brand's imagery and reputation to persuade consumers that theirproducts are related to the brand. Lookalike packaging is most commonly usedby retailers who seek to gain market share by associating their products withthe brand leaders. There is no doubt that authoritative polling has shown thatshoppers are confused and believe that when they are buying similarlypackaged products they are buying the genuine goods.

I believe that an investment in a brand which may take years to be associatedin consumers' minds with quality, taste or value should be protected on behalfof the consumers. In this case, imitation is not the sincerest form of flattery. Itis a form of theft and should be treated as such. The amendments seek toprevent lookalike products by ensuring that unfair competitive practices areoutlawed.68

The Government replied that the rights being proposed by the amendments were far tooextensive. It also argued that the Competition Bill is not an appropriate place to address theissue of lookalikes, particularly since it claims there is no consensus on how such productsshould be treated:

….. the Government recognise the concerns which brand owners haveexpressed about the current remedies available to protect their products. The

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noble Lord is quite right: following the debate on this issue at the Committeestage, the Competition and Consumer Affairs Minister, Mr. Nigel Griffiths,met representatives of the British Brands Group and another trade group, AntiCopying in Design, which has similar concerns.

While it remains our view that this Bill is not an appropriate vehicle to dealwith this issue, it has been agreed that those two groups will make furtherrepresentations to Ministers on this matter. These groups are in touch withofficials. I should again point out that there is not a consensus on this issue; inparticular the Government are concerned to ensure that the interests of theconsumer are fully represented and considered.

Opportunities to discuss unfair competition have also arisen since the TradeMarks Bill was debated in 1994, notably before the Standing AdvisoryCommittee on Industrial Property. That committee has not recommended thatthere is a need for unfair competition legislation. The committee is continuingto review the issue as further evidence is presented.

I hope noble Lords will see that we are prepared to explore with the industryand consumers the appropriate response to the concerns that have been raisedthis evening. Meanwhile, there are effective remedies in common law andunder the Trade Marks Act 1994 where confusion is caused in the mind of theconsumer. I gave examples in Committee. Lookalikes in the form of thealleged imitation of packaging can be dealt with by the common law tort ofpassing off, which has proved effective. I referred to the Penguin v. Puffincase.

As I have said, these amendments in any instance would go well beyond theissue of defining unfair competition as acts or practices which would causeconfusion to consumers. Given this, as well as the lack of consensus on what,if any, further remedies are needed in this area, and the Government'swillingness to consider the representations I mentioned earlier, I invite thenoble Lord to withdraw his amendment.69

69 HL Deb 23 February 1998 cc 524-5


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XI Bibliography

Parliamentary progress (House of Lords)

Second Reading, HL Deb 30 October 1997 cc1144ff

Committee Stage Day One, HL Deb 13 November 1997 cc256ff

Committee Stage Day Two, HL Deb 17 November 1997 cc367ff

Committee Stage Day Three, HL Deb 25 November 1997 cc868ff

Report Stage Day One, HL Deb 9 February 1997 cc873ff

Report Stage Day Two, HL Deb 19 February 1998 cc327ff

Report Stage Day Three, 23 February 1998 cc453ff

Third Reading, HL Deb 5 March 1998 cc

Government publications

Review of restrictive trade practices policy: A consultative document, [Green Paper] DTI,March 1988 [Cm 331]

Opening markets: New policy on restrictive trade practices, [White Paper] DTI, July 1989[Cm 727]

Abuse of market power: A consultative document on possible legislative options [GreenPaper], DTI, November 1992 [Cm 2100]

Tackling cartels and the abuse of market power: Implementing the government's policy forcompetition law reform: A consultation document, DTI, March 1996

Tackling cartels and the abuse of market power: A draft Bill, DTI, August 1996

A prohibition approach to anti-competitive agreements and abuse of a dominant position:draft Bill, DTI, August 1997http://www.dti.gov.uk/competition/bill/default.htm

A fair deal for consumers: Modernising the framework for utility regulation, DTI, March1998

A guide to the major provisions of the Competition Act 1998 [draft 23/3/98], OFT, March1998


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Market definition: A guide to the provisions of the Competition Act 1998 [draft 23/3/98],OFT, March 1998

Other publications

Encyclopedia of Competition Law, Sweet & Maxwell

Competition Law, Richard Whish, 1993

Competition and Consumers: Policy and Practice in the United Kingdom, NationalConsumer Council, 1995

An outline of United Kingdom competition policy, Office of Fair Trading pamphlet, 1995

Monopolies and anti-competitive practices: A guide to the provisions of the Fair Trading Act1973 and the Competition Act 1980, Office of Fair Trading pamphlet, 1995

Restrictive agreements: a short guide to the law on restrictive trading agreements, Office ofFair Trading pamphlet, 1995

A guide to United Kingdom and European Union competition policy, Nick Gardner, 1996

XXVIth report on Competition Policy, European Commission, 1997 [SEC(97)628 final]

CBI response to August 1997 Draft Bill, CBI, September 1997

Competition Policy Reform, the National Consumer Council's response to the Draft Bill,September 1997

Promoting prosperity: A business agenda for Britain, Commission on Public Policy andBritish Business, 1997

Exemption criteria under Article 85(3) EC: A study of the case law of the European Court ofJustice, the Court of First Instance and the decisional practice of the European Commission,Richard Whish, 1997

Competition Bill: Exclusion of land agreements: A discussion paper, DTI, February 1998[Deposited Paper, 3rd series, 5691]

The treatment of vertical agreements under the Competition Bill: A report for theCompetition Bill Team, Richard Whish and William Bishop, 1998