Competition and Monopoly Laws in the UK - Assignment Example

Since your business might enter the category of a monopoly, it is important for you to know that competition and monopoly laws in the UK are very stringent. The government makes it absolutely clear that fair trade practices must be employed at all times. And if anyone is found guilty of deliberately entering into monopolistic agreements, that person is liable to major penalties.

In the United Kingdom, the Competition Act 1998 has been designed to ensure fair trade practices in businesses. The government wants businesses to compete in a fair and healthy environment that doesn’t hinder competition and thus certain anti-competitive activities are strictly discouraged under Chapter I and Chapter II prohibitions. The Office of Fair Trading is the most important government body in this connection. It has the power to impose penalties on those found breaching the law. The amendments made to this Act in May 2004 assigned greater powers to OFT so it can now conduct investigations in case a business is suspected of violating the prohibitions. Apart from Chapter 1 and II prohibitions, businesses need to be mindful of the anti-competitive activities outlined in Articles 81 and 82 of the EC Treaty. These prohibitions are similar to those contained in Chapters I and II but contain some additional information.

This Act works in tandem with Enterprise Act 2002 focuses on the penalties for individuals who enter anti-competitive agreements and warns that such behavior is liable to criminal prosecution.

Company directors are under increased pressure from the government now with amendments to the Company Directors Disqualification Act 1986 under the Enterprise Act 2002 whereby individuals found to breaching the law may face Competition Disqualification Orders. This can prevent them from managing a company for 15 years.

Some key implications to remember to include the power of OFT officials to demand documents that can establish the status of a firm and its trade practices. Any breach of fair trade practices can result in a 10 percent fine for your business on an annual basis. Third parties can claim damages.

The Enterprise Act 2002 has given additional force to compliance laws by making some anti-competitive activities criminal. The cartel offense clause can make some monopolistic activities liable for criminal prosecution. OFT gives priority to cases of cartel offense and if found involved in a cartel, your business can face serious charges.

The Fair Trading Act had initially granted the power to Competition Commission for making monopoly references. However, under Enterprise Act 2002 those powers have been assigned to the Office of Fair Trading, which can now work as a statutory body in tandem with a Board.

The Competition Commission is still an important body in this connection as it had the power to investigate monopolies on the direction of the Director of the Fair Trade agency. However, most of those powers have now been granted to the Office of Fair Trading. It can still make investigations when an appeal is registered on some decision taken by OFT.

The Director General of Fair Trading has the power to investigate alleged breaches and if it finds that prohibitions have been violated, companies can be charged 10 percent of their annual revenue for 3 years. This is something that you will have to be very careful of since these charges can erode your profits for many years. That will consequently affect your share price and might result in a takeover.

With the agencies and bodies that would try to control your monopolistic activities, there are some safeguards available that you should be aware of. If your company is concerned about possible monopolistic charges, you can instantly notify the Office of Fair Trading of agreements and any other activities that might constitute anti-competitive behavior. This can help you in seeking an exemption by explaining how it might help and benefit other players. Secondly, some agreements may actually not be in the jurisdiction of the agency and notification can help you understand where exemptions can be sought.

The second important safeguard available can come into practice when your company has already been charged with the breach. Companies can then seek immunity against or a reduction in fines and penalties. Further appeals can be made against decisions connected with exemptions, and interim orders. These appeals are made to Appeal Tribunals, which is a part of the Competition Commission, and this new duty of the CC is in addition to the activities assigned to it by the now-defunct Monopolies and Mergers Commission.

These are some of the laws and agencies that you must remain mindful of before engaging in any activity or agreement that might be considered anti-competitive. The laws are strict and charges can result in erosion of profits. No new business would be able to survive that and for this reason, it's important to check with the OFT.