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NEW COMPETITION ACT THE SPUR TO INNOVATION AND ENTERPRISE

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The new Competition Act will spur the modernisation of the British ...
The new Competition Act will spur the modernisation of the British

economy by creating stronger firms better able to compete in the

global market of the 21st century, competition minister Kim

Howells has said.

Enterprising and innovative companies will be the real winners from

the new Competition Act. By providing an effective deterrent against

anti-competitive behaviour, the Act will provide more opportunities

for British business to thrive.

Dr Howells told the CBI competition conference that it was right that

the director general of fair trading should have strong

investigatory and enforcement powers because they were necessary to

root out the worst offenders. For example, cartels by their very

nature are secretive and cautious. Only those companies who engage in

anti-competitive behaviour will have anything to fear from the tough

investigatory powers in the Act.

Dr Howells said:

'The Restrictive Trade Practices legislation may have suited some

companies and sectors in 1950s Britain but it is now hopelessly out

of date for tackling cartels, abuses and other anti-competitive

behaviour. It provides no real deterrent against dominant companies

which bully their competitors and exploit their customers. It allowed

too many British companies to become fat, complacant and

manipulative.

'Serious anti-competitive behaviour can go unchecked through often

lengthy investigations and, in the meantime, competitors can be

forced out of business. Even when the evidence has been obtained,

there are no financial penalties for such activity - only for

breaching such court orders. Essentially the worst that can happen to

companies when anti-competitive behaviour is first detected is that

they are asked to stop. But firms which are damaged by proven

anti-competitive behaviour can get no recompense.

'The Competition Act will put these failings right. It will provide

an effective deterrent coupled with effective powers of

investigation and enforcement. It will also provide greater scope

for competitors and consumers to launch complaints. Companies and

individuals who have been harmed by infringements of the prohibitions

will be able to claim for damages. This should help protect the

vulnerable from predatory activity and help promote greater

competition.

'Like the EC regime, the Act allows for financial penalties to be

imposed on those who infringe either of the prohibitions. This may

involve a sum of up to ten per cent of annual UK turnover for the

worst offenders.'

Dr Howells said that responsibility for avoiding anti-competitive

behaviour would now rest with business.

He said: 'In the past there has been little onus on business to take

responsibility for avoiding anti-competitive conduct. The worst that

could happen when anti-competitive behaviour was first detected was

that a company could be asked to stop.

'Under the new regime we see it as the responsibility of the parties

themselves to ensure that their conduct does not breach the

prohibitions. Thisis because anti-competitive conduct may give rise

to penalties or claims for damages not from the point at which it is

detected, but right back to the time the prohibition was first

infringed.'

The new prohibition regime, which adopts domestic prohibitions based

on Articles 85 and 86 of the EC Treaty, will come into force on 1

March 2000, providing businesses with a reasonable time to prepare

for the change. In addition, the Act also provides transitional

periods for existing valid agreements and removes the burden to

furnish most new registrable agreements made between Royal Assent (9

November) and the March 2000 starting date.

Notes

1. The Competition Act removes the burden of notifying large

numbers of agreements to the Office of Fair Trading. Detailed

guidelines will be issued by the director general of Fair Trading on

how the assessment of anti-competitive effects will be made,

including the sort of behaviour likely to break the prohibitions. If

there is any doubt in individual cases businesses will be able to

seek guidance.

2. The Act will introduce a new domestic competition regime in

the UK prohibiting anti-competitive agreements and the abuse of a

dominant position. The prohibitions are modelled on Articles 85 and

86 of the EC Treaty which apply to agreements and conduct which

affect trade between EC member states.

3. The Act provides for a Competition Commission to replace the

existing Monopolies and Mergers Commission (MMC). The new commission

will hear appeals against decisions under the prohibitions, as well

as having transferred to it the existing functions of the MMC. The

Government intends that the new Competition Commission should come

into force on 1 April 1999. This will enable the new body to be

fully prepared to perform its new functions once the prohibitions

come into force.

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