■agreeing to fix purchase or selling prices or other
trading conditions;
■agreeing to limit or control production, markets, tech-
nical development or investment;
■agreeing to share markets or supply sources;
■agreeing to apply different trading conditions to equi-
valent transactions, thereby placing some parties at
a competitive disadvantage;
■agreeing to make contracts subject to unrelated
conditions.
The agreement must have an ‘appreciable effect’ on
competition. An agreement is unlikely to be considered
as having an appreciable effect where the combined
market share of the parties does not exceed 25 per cent.
However, agreements to fix prices, impose minimum
resale prices or share markets will be seen as capable of
having an appreciable effect even where the market
share falls below 25 per cent.
Certain types of agreement are excluded from the
Chapter I prohibition, such as where there are overrid-
ing considerations of national policy. Some agreements
are exempt from the prohibition. There are three types
of exemption:
1 Individual exemption.The parties to an individual
agreement may apply to the Office of Fair Trading
(OFT) for exemption for their agreement, if it can be
shown that the agreement contributes to improving
production or distribution, or to promoting technical or
economic progress and allows consumers a fair share of
the resulting benefit. Any restrictions in the agreement
must be indispensable to achieving these aims and the
agreement must not eliminate competition.
2 Block exemptions.These exemptions apply auto-
matically to certain types of agreement which meet the
same exemption criteria as for individual exemption.
3 Parallel exemptions.These exemptions automatically
apply where an agreement is covered by an EC individual
or block exemption under Art 81(3) of the EC Treaty,
or would be covered by an EC block exemption if the
agreement had an effect on trade between member states
of the EU. In certain circumstances, the OFT may im-
pose conditions on the exemption or vary or cancel the
exemption.
Chapter II prohibition
The second prohibition, the Chapter II prohibition, is
based on Art 82. It prohibits the abuse by an undertak-
ing of a dominant position in the UK or part of the UK,
where this affects trade within the UK. The Act contains
an illustrative list of the kinds of conduct which may be
deemed an abuse:■imposing unfair purchase or selling prices;
■limiting production, markets or technical develop-
ments to the prejudice of consumers;
■applying different trading conditions to equivalent
transactions, thereby placing certain parties at a com-
petitive disadvantage;
■attaching unrelated supplementary conditions to
contracts.There are two tests for determining whether the
Chapter II prohibition applies:■whether an undertaking is dominant; and
■if it is dominant, whether it is abusing its dominant
position.An undertaking will be regarded as dominant if it can
behave ‘to an appreciable extent independently of its
competitors and customers and ultimately of con-
sumers’ when making decisions. The Act does not set
any market share thresholds for a presumption of dom-
inance but guidance from EC case law is relevant. The
European Court of Justice has stated that dominance
can be presumed if an undertaking has a market share
persistently above 50 per cent. The OFT takes the view
that an undertaking is unlikely to be considered dom-
inant if its market share is less than 40 per cent.
Nevertheless, an undertaking with a lower market share
may be considered dominant if, for example, the struc-
ture of the market enables it to act independently of its
competitors. The OFT will consider the number and size
of existing competitors as well as the potential for new
competitors to enter the market.
The Chapter II prohibition is subject to similar exclu-
sions to the Chapter I prohibition. There are, however,
no exemptions from Chapter II.Enforcement
Responsibility for enforcing the new legislation rests
primarily with the OFT. It has the power to grant ex-
emptions, investigate suspected breaches, make decisions
enforceable by a court order and publish advice and
information. The utility regulators enjoy equivalent
powers within their own areas of responsibility.
If the OFT has reasonable grounds for suspecting an
infringement of the Act, it may exercise the following
powers:Part 3Business transactions