Navigating the minefield of national, international and European Union (EU) competition law can be difficult for businesses of all sizes. It is important you obtain legal advice to ensure your company is compliant and is in a position to make the most of new opportunities.
We appreciate that incorporating this level of specialist knowledge into your organisation can seem a pretty big undertaking, especially when you’re busy running a business. This is why we are here to help ease the burden.
Speak to our solicitors today for thorough, expert advice on all aspects of competition law. We have three offices across Yorkshire in Sheffield, Leeds and York, which be contacted by calling 0333 323 5292 or by filling in our online enquiry form.
Our competition law solicitors offer expert advice exactly when you need it. We provide tailored education and training programmes to ensure you have a full understanding of what is required of you and your business.
We have helped many businesses - large and small - with risk management and compliance programmes that are appropriate and continually evolve as a business develops. This ensures that your interests are always protected and your team is in a position to make decisions that drive your business forward.
About Competition Law
In many countries and regions around the world, complex rules and regulations outlaw certain business practices, such as cartels, price fixing, and sharing territories, markets and customers. UK businesses are subject to domestic law in the form of the Competition Act 1998 and the Enterprise Act 2002, as well as European law in the form of Articles 101 and 102 of the Treaty of the Functioning of the European Union (TFEU). Whilst Brexit may affect this area of law as many others, European law will remain relevant post-Brexit as activity by UK businesses will often have an effect within the EU.
These laws are stringently applied by the Competition and Markets Authority (CMA), National Competition Authorities (NCAs), including the European Competition Network, and the European Commission. These regulations impose conditions on some business mergers and, in some circumstances, will outlaw them altogether.
Competition law can be relevant to formal and informal, binding and non-binding agreements, including verbal agreements. It also applies to cooperation or concerted practices, as well as decisions and recommendations of trade associations.
It is no longer possible to notify the CMA or European Commission of an agreement or practice to obtain guidance or a decision. The emphasis is now on self-assessment. Nevertheless, a complaint may still be made to the CMA, which will, eventually, give its view on whether the agreement complained of infringes the law.
Types of Practice that Trigger a Competition Law Investigation in the UK
In the Competition Act 1998, the ‘Chapter I Prohibition’ outlaws certain agreements or practices that have an appreciable effect on trade in the relevant market within the UK.
The types of agreement and practice that are outlawed as restricting competition include:
- Agreeing to fix prices or other trading conditions
- Agreeing to limit or control production, markets, technical development or investment
- Agreeing to share markets or supply sources
- Agreeing to make contracts subject to unrelated conditions
- Agreeing to apply different trading conditions to equivalent transactions, thereby placing some parties at a competitive disadvantage
Price fixing and market sharing are the worst types of agreements and are usually outlawed regardless of market share, although there are some exemptions. The other types are generally allowed as long as the parties’ market shares are below certain thresholds.
Exemptions Under UK Law for Infringing Agreements
There is a de minimis rule that exempts all agreements - except for clear anti-competitive agreements, such as price fixing agreements - between undertakings with a relatively low combined applicable turnover and/or low market shares. Regardless of this, the CMA or the European Commission may investigate such an agreement and make a decision to withdraw this ‘small agreement’ immunity.
The de minimis exemption does not apply to a cartel that is illegal regardless of how small the parties’ market share is.
Other exemptions include parallel and block exemptions, which means agreements falling within an EU block exemption are also protected from challenge under UK competition law. It should also be noted that if the agreement or practice is a merger based mainly in a member state, it will be regulated either by EU Merger Regulation or National Merger Law and Regulations.
Types of Practice that Trigger a Competition Law Investigation Under EU Law
Agreements and concerted practices that may have an appreciable effect on trade between EU member states are made illegal by Article 101 of the TFEU. The word ‘may’ catches agreements that only have a potential effect on trade between member states. The agreement may be between, for example, two undertakings in the UK and still have an effect on trade between EU member states.
The types of agreement and practice that are outlawed are similar to those prohibited by UK legislation.
Exemptions Under EU Law for Infringing Agreements
There is a de minimis provision for agreements and practices - not including price fixing agreements - of small undertakings. It is contained in the Commission Notice on Agreements of Minor Importance (OJ C368, 22.12.01, p.13).
There are many other ways an agreement can be exempt under EU competition law. For example, there is a system of EU block exemptions, such as for vertical agreements and technology agreements.
It is also possible for an agreement to be exempt under the general exemption in Article 101 (3). This exemption applies to agreements that:
- Contribute to improving production or distribution or to promoting technical or economic progress
- Allow consumers a fair share of the resulting benefits
- Are indispensable to achieving those objectives
- Do not eliminate competition in a substantial part of the products concerned
There is also a block exemption on specialisation agreements and another on research and development agreements. Most block agreements have market share thresholds. Typically, these are below 30% market share of the relevant market.
Powers of UK and EU Authorities
The CMA and European Commission investigate infringements of UK and EU law. The European Commission investigates the most serious infringements of EU competition law. The Commission’s powers of investigation are slightly wider than the CMA’s, as it is able to search private homes if it suspects that a company’s documents are stored there.
The two authorities’ powers are, however, broadly the same and can be briefly summarised as the power to:
- Ask businesses in a market to provide information in writing
- Request to enter premises without a warrant
- Enter premises with a warrant
- Request to see and take copies of any document that they consider related to any matter relevant to the investigation
- Require any person or premises to say to the best of his knowledge where any such document may be found and to provide an explanation of it
In respect of criminal cartel activity, the CMA’s powers are much wider. The CMA may gather evidence of cartel activity at any time by informal methods, including enquiries by correspondence. Once the CMA has reasonable grounds for suspecting that a criminal cartel offence has been committed, it may conduct a formal investigation under the Enterprise Act 2002.
In a formal investigation, the CMA has the power to tap telephones, use hidden cameras and use informants in addition to the power to require a person to answer questions or provide documents. To read more about cartel activity, take a look at our guide.
Both authorities have the power to regulate mergers and acquisitions, but their powers differ depending on the type and size of such deals. The European Commission investigates and clears/refuses mergers with a European dimension. The CMA, under the Enterprise Act 2002, regulates mergers and acquisitions of the requisite size or nature in the UK. If the CMA investigates mergers initially, the case may then be referred to the European Commission.
Please note this information is provided by way of example and may not be complete and is certainly not intended to constitute as legal advice. You should take bespoke advice for your particular circumstances.
What is an appreciable effect?
Whether there is an appreciable effect is something that needs to be assessed individually for any particular activity in light of all the relevant circumstances. The European Commission has suggested a general rule that there will be no appreciable effect if the combined market share of the parties to a deal is below 5%.
Cartels and agreements that fix prices or partition markets will be prohibited regardless of market share. Other agreements, however, may escape the effects of both domestic and EU competition law by virtue of them being between undertakings with relatively low-market share.
How do I define the market?
A market is a combination of the product and geographic markets, and in some cases, the technology market.
The product market is determined by the substitutability of other products, both on the demand side and the supply side. Ask yourself whether a small but significant permanent increase in the price of your product would make customers switch to an alternative product. If it would, then your product market should include any other such products.
The geographic market is determined by asking yourself whether a small but significant permanent increase in the price of your product would make customers switch to suppliers in an alternative area. If it would, then your geographic market should include any other such areas.
What is abuse of dominant position?
Conduct that amounts to abuse of a dominant position, which may affect trade in the EU, is made illegal by Article 102 of the TFEU and Chapter II of the Competition Act 1998. Dominant undertakings must not, among other things:
- Impose unfair prices
- Refuse to supply
- Limit production or the markets/technical development to the prejudice of consumers
- Apply different trading conditions to equivalent transactions, thereby placing certain parties at a competitive disadvantage
- Attach unrelated supplementary conditions to a contract
Dominance can be presumed where a business has a market share of above 50% of the relevant market. The CMA has said that it is unlikely to consider a business as dominant if it has a share of the relevant market of less than 40%, but this is not a hard and fast rule.
For those with less than 50%, dominance will depend on factors such as whether or not the business is able to prevent effective competition being maintained in its market and whether it has the power to behave independently of its competitors and customers.
How do I report a cartel?
If you have discovered a cartel, you should contact the CMA.
How do I challenge a restrictive agreement or practice?
If you wish to challenge a restrictive agreement or practice, you can:
- Sue in the courts for damages
- Pursue an injunction
- Complain to the CMA or European Commission
A complaint is the preferred way to challenge a suspected competition law breach because the cost of carrying out a market assessment to support a court case will be prohibitive.
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To speak to a solicitor about UK or EU competition law, get in touch with our Leeds, Sheffield or York office by using the details below.
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