In recent years, the landscape of UK competition law has undergone some significant changes, especially following Brexit. The UK’s departure from the European Union meant that many EU regulations no longer applied to UK businesses. As a result, UK competition law, which governs how businesses operate in terms of market practices and consumer protection, has evolved to reflect a more independent legal framework. In this blog, we’ll explore the key aspects of UK competition law post-Brexit, examining its framework, including crucial areas such as price-fixing and anti-competitive behaviour.
What is UK Competition Law?
Competition law is in place to defend businesses and consumers against anti-competitive actions. It promotes strong competition, which leads to open markets that drive productivity, innovation, and better value for customers. All businesses are required to follow these laws, and there can be significant consequences for those who do not, including penalties for both the companies and their directors.
The UK competition law framework is largely based on two main pieces of legislation:
- The Competition Act 1998 (CA98) – This Act is the backbone of UK competition law. It provides the foundation for anti-competitive practices, including prohibiting cartels, abuse of market dominance, and anti-competitive agreements.
- The Enterprise Act 2002 – This Act primarily deals with mergers and market investigations. It empowers regulators to investigate and block mergers that could reduce competition substantially.
Additionally, the UK’s Competition and Markets Authority (CMA) plays a key role in enforcing competition rules. The CMA has the power to investigate suspected violations, impose fines, and take action against businesses engaging in anti-competitive practices
The Impact of Brexit on UK Competition Law
Brexit has significantly altered the UK’s approach to competition law. Before leaving the EU, UK competition law was heavily influenced by European competition rules, and the European Commission had jurisdiction over many competition-related matters. However, after Brexit, the UK gained more control over its legal framework, although many aspects of EU competition law have been retained to maintain consistency.
The Role of the CMA
The Competition and Markets Authority (CMA) is the UK’s competition regulator, responsible for enforcing competition laws and providing guidance on anti-competitive behavior.
The CMA can use strong investigative and enforcement powers to investigate anti-competitive practices on its own or after receiving a complaint. It can also accept binding commitments, where a company resolves issues without admitting wrongdoing, or approve voluntary redress, where a company compensates those harmed by anti-competitive actions.
Anti-competitive agreements
Anti-competitive agreements are arrangements between businesses that prevent, restrict, or distort competition. These agreements can be intentional or result in such effects. The CMA also considers “concerted practices,” where companies coordinate in ways that harm competition, even without a formal agreement.
Examples of anti-competitive agreements include:
- Fixing prices for goods or services
- Controlling markets, production, or investment
- Sharing markets or sources of supply
Cartels
A cartel is a severe form of anti-competitive agreement involving activities like:
- Fixing prices
- Limiting supply or production
- Sharing customers or markets
- Bid-rigging
Cartels are considered the most serious type of anti-competitive behavior, and the CMA imposes harsher penalties for cartel activity. Individuals involved in a cartel can face up to five years in prison and a confiscation order. Under the Enterprise Act 2002, company directors can be disqualified for up to 15 years.
Abuse of Dominant Market Position
Abuse of a dominant market position is against the law under Chapter II of the 1998 Act. Companies with a market share of 40% or more can be considered dominant if they can act independently of competitors, customers, and consumers. However, abuse of this power can result in fines up to 10% of global turnover, injunctions, and legal action.
Examples of abuse include unfair trading terms or forcing customers to buy unwanted products to access desired ones. The CMA looks at the market leader’s actions and context to determine if abuse is occurring, such as refusing to trade with a company due to its poor credit rating, which may not be considered anti-competitive.
The Digital Markets, Competition and Consumers Act (2024) ERA
The UK’s competition rules are undergoing significant changes, strengthening the Competition and Markets Authority’s (CMA) ability to investigate and enforce compliance. Key updates from the Digital Markets, Competition and Consumers Act 2024 (DMCC Act), effective January 1, 2025, include stricter rules for mergers, market investigations, and fines for non-compliance. New rules for digital markets will target large tech companies designated with “strategic market status.” The changes also aim to make the CMA’s processes more flexible for businesses, especially in mergers and acquisitions. Additional consumer protection law changes will take effect gradually from April 2025. Businesses should prepare by reviewing their policies and training to comply with the new regulations.
Here are some key steps businesses should take to ensure compliance with UK competition law:
- Educate and Train Employees: Businesses should educate their staff, especially those in key departments like sales, marketing, and procurement, about the importance of competition law. Training should cover what constitutes anti-competitive behavior, such as price-fixing, market sharing, and abuse of dominance.
- Review Business Practices: Regularly review business contracts and agreements to ensure they don’t contain any anti-competitive provisions. This includes supplier and distribution agreements, joint ventures, and pricing arrangements.
- Cooperate with Authorities: In case of an investigation, businesses should cooperate with the CMA and other regulatory authorities. Failure to do so could result in more severe penalties.
- Seek Legal Advice: Businesses should seek legal advice when in doubt about their compliance with competition law. A competition law expert can provide guidance and help navigate any potential risks.
Conclusion
Compliance with UK competition law is crucial for businesses of all sizes. The law ensures that companies can compete fairly and that consumers are protected from harmful practices such as price-fixing and market manipulation. Post-Brexit, the UK has retained many of the core principles of competition law while taking steps to strengthen its independent regulatory framework. By understanding and complying with the law, businesses can help foster a competitive, dynamic market that benefits both consumers and the economy. For more information, Contact us Today.
