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Wednesday, 1 March, 2000, 08:21 GMT
Government tackles the cartels
UK Competition Maze
The government hopes to tackle the cartels that keep prices high head-on with a tough new Competition Act that comes into force on Wednesday.

Under the new law companies which over-charge customers and conspire to fix prices can be fined up to 10% of their total sales.

And the government watchdog, the Office of Fair Trading, has been given new strong powers to investigate cases of abuse - including criminal penalties for companies that do not cooperate with them.
Banned practices
Restrictions on prices
Restrictions on customers or markets
Exclusive supply or purchasing contracts
Agreements by firms not to compete against each other
The government is hoping that the tough new competition regime will put an end to "rip-off Britain" and help make British companies among the most competitive in the world.

Trade Secretary Stephen Byers said the Act "introduces the toughest regime we have ever had in this country ... (it) can play an important part in improving the competitive position of British business".

Investigations underway

Two major investigations of anti-competitive price-fixing have already begun before the act came into force - one into supermarket prices, the other into the costs of new cars.
Stephen Byers: tough competition policy
Stephen Byers: tough competition policy
Mr Byers is due to publish the result of the investigation into car prices shortly, while the first stages of the supermarkets investigation did failed to turn up many unjustified price differences.

Nevertheless the new Act will greatly strengthen the hand of the Office of Fair Trading, which will have the power to enter premises and seize documents without warning.

Industry worried

The new powers have been described as "draconian" by the Confederation of British Industry which is worried that a tough enforcement regime could prove disruptive to many businesses and lead to job losses.

The Act applies to all firms, whatever their size, which are guilty of practices "which prevent, restrict or distort competition" or "abuse their dominant market position".

That will normally apply when a company has a market share of 25% or more.

Special regulations apply to so-called "natural monopolies" like gas, water, electricity and telecoms services, where the regulators for these industries have been given new powers under the Competition Act.

The new Act brings the UK in line with EU legislation on competition, and is directly copied from Articles 81 and 82 of the Treaty of Rome.

Indeed Mario Monti, the EU competition commissioner, still has a key role in approving larger mergers - although the Trade Secretary is retaining a limited role in blocking or approving UK mergers.

Highly political

The government's drive to strengthen competition policy is a key part of its modernising, new Labour agenda.

The Labour Party is keen to be seen as acting in the interests of consumers rather than its traditonal role of protecting producers through its trade union links, preserving jobs in uncompetitive or nationalised industries.

But that strategy has its risks. If the competition regime is too tough, there could be a backlash from companies and workers who are driven out of business.

But if it is too lax; then all the hype about rip-off Britain will prove to be an idle threat, disappointing consumers.

Mr Byers has already decided not to renew the contract of the current head of the OFT, John Bridgeman, for being too close to industry.

But whoever is running competiton policy will find it a tough job in the run-up to the General Election.

John Bridgeman, Office of Fair Trading
"This legislation is good for consumers, and is also good for business"
See also:

01 Mar 00 | UK Politics
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