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OFT publishes revised competition law guidelines

215/04     21 December 2004

The OFT has today published its revised competition law guidelines and related guidance in light of EC Regulation 1/2003 (known as the Modernisation Regulation), which substantially changed the framework for enforcement of EC competition law. The OFT has also published today a response to points raised during the consultation.

The guidelines can be downloaded from the modernisation publications page

The Modernisation Regulation came into force on 1 May 2004. It allows for the application of EC competition law by national competition authorities and courts of EC Member States, in addition to the European Commission.

Key changes and points addressed by the documents published today include:

• the application of Articles 81 and 82 by the OFT and the concurrent regulators
• the abolition of the notification system and the introduction of a system under which businesses must self-assess compliance with both EC and national competition law
• how the OFT will approach its new power to take binding commitments to address its competition concerns.

Since modernisation, the OFT is one of a network of competition authorities in Europe applying Articles 81 and 82 to anti-competitive practices which may affect trade between Member States. The OFT now has powers  to enforce Articles 81 and 82 in cases involving anti-competitive agreements and abuses of dominance potentially affecting trade between EC Member States. This is in addition to its powers to enforce the Chapter I and Chapter II prohibitions which apply to anti-competitive agreements and abuses of dominance with the potential to affect trade within the UK.

Amendments have also been made to the documents to incorporate changes introduced by the Enterprise Act 2002 and to reflect experience in applying the Competition Act 1998.

Penny Boys, OFT Executive Director, said:

'The revised guidelines and guidance published today set out how the OFT proposes to use its Competition Act enforcement powers, including the new powers it has had since 1 May. They will help business understand better how modernisation will work in the UK.'

NOTES

1. The OFT published for consultation the proposed revisions to its competition law guidelines, related guidance and procedural rules on 7 April 2004 (see press release 66/04), as required by sections 31D, 38 and 52 of the Competition Act 1998. The new guidelines, guidance and the OFT's response to the points raised during consultation are available from the publications page. Hard copies can be ordered from 020 8867 3272 after 17 January 2005.

The new procedural rules relating to the OFT's investigation and enforcement functions under the Competition Act came into force on 17 November, following approval by the Secretary of State for Trade and Industry (see press release 188/04). The new rules are contained in the Schedule to the Competition Act 1998 (Office of Fair Trading's Rules) Order 2004 SI 2004/2751 and replace the OFT's existing rules. SI 2004/2751 is available on the HMSO website

2. The 14 documents that the OFT has today published are: Modernisation (OFT442), Agreements and conduct (OFT401), Abuse of a dominant position (OFT402), Market definition (OFT403), Powers of investigation (OFT404), Concurrent application to regulated industries (OFT405), Enforcement (incorporating the OFT's guidance as to the circumstances in which it may be appropriate to accept commitments) (OFT407), Trade associations, professional bodies and self-regulating organisations (OFT408), Assessment of market power (OFT415), Vertical agreements (OFT419), Land agreements (OFT420), Services of general economic interest exclusion (OFT 421), the OFT's guidance as to the appropriate amount of a penalty (OFT423), and the response to points raised during the consultation on the competition law guidelines, guidance and OFT's Rules.  The OFT's guidance as to the circumstances in which it may be appropriate to accept commitments (annexed to Enforcement (OFT407)) and the OFT's guidance as to the appropriate amount of a penalty (OFT423) have been approved by the Secretary of State, as required by sections 31D(4) and 38(4) respectively of the Competition Act.

3. Article 81(1) of the EC Treaty prohibits agreements which may affect trade between Member States and which have as their object or effect the prevention, restriction or distortion of competition within the common market.   However, an agreement which satisfies the conditions set out in Article 81(3) will not be prohibited under Article 81(1).  Article 81(3) provides that an agreement is not prohibited if it:

'contributes to improving the production or distribution of goods or to promoting technical or economic progress, while allowing consumers a fair share of the resulting benefit, and which does not:

impose on the undertakings concerned restrictions which are not indispensable to the attainment of these objectives, or

afford such undertakings the possibility of eliminating competition in respect of a substantial part of the products in question.'

4. Article 82 of the EC Treaty prohibits conduct which amounts to an abuse of a dominant position within the common market which may affect trade between Member States.

5. The Chapter I prohibition and the Chapter II prohibition of the Competition Act 1998 are based on Article 81 and Article 82 of the EC Treaty respectively, but apply to anti-competitive practices which affect trade within the United Kingdom.

6. In accordance with Article 3 of the Modernisation Regulation, the OFT is required to apply EC competition law, as well as national competition law, where national competition law is applied to anti-competitive agreements and/or abuses of dominance in the UK which may have an effect on trade between EC Member States.

7. The Competition Act 1998 is also enforced by the regulators for communications matters, gas, electricity, water and sewerage, railway and air traffic services (under section 54 and Schedule 10 of the Competition Act 1998). These regulators can exercise powers under the Competition Act 1998 concurrently with the OFT in relation to their respective sectors.  Since modernisation, these regulators also have concurrent powers to apply Articles 81 and 82.

8. The European Competition Network (ECN) has been set up to facilitate close co-operation between the national competition authorities of the EC Member States and the European Commission and to ensure an effective and consistent application of Articles 81 and 82.

9. The OFT's new power to take binding commitments, which is a power shared with the concurrent regulators, is provided for by sections 31A-31E and Schedule 6A of the Competition Act, which were inserted by The Competition Act 1998 and Other Enactments (Amendment) Regulations 2004 SI 2004/1261, with effect from 1 May.

10. The Enterprise Act 2002 came fully into force on 20 June 2003 and has wide-ranging implications for business and consumers. The Enterprise Act has made a number of significant reforms to competition law and consumer law enforcement in the UK.  The new provisions work alongside the Competition Act 1998 and various pieces of consumer legislation. For further information see Enterprise Act section or telephone the OFT enquiries line on 0845 7224499.

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