Chapter 7Introduction to the law of contract■order the production of any relevant documents or
information (it may take copies of any documents
produced and require an explanation of the contents);
■enter premises without a warrant in order to obtain
documents, take copies of them, obtain an explana-
tion of the documents or obtain information held on
a computer to be produced in a readable form (two
working days’ notice must be given to the occupier of
the premises unless, for example, the undertaking is
already under investigation);
■enter premises without notice on the authority of a
High Court warrant, to search for documentary
evidence.
Failure to co-operate with an investigation may
amount to a criminal offence, punishable by a fine or
imprisonment.
If the OFT concludes that infringement of either pro-
hibition has occurred, it may give a direction to either
party to bring the infringement to an end. This may
include directions to modify or terminate the agreement
or modify or cease the offending conduct. If a party fails
to comply with a direction, the OFT can seek a court
order to secure compliance. Any breach of a court order
will be dealt with as a contempt of court.
Consequences of breach
The OFT has the power to impose civil fines of up to
10 per cent of an undertaking’s turnover for infringe-
ment of either Chapter I or Chapter II prohibitions.
Small businesses enjoy limited immunity from financial
penalties in respect of small agreements (Chapter I pro-
hibition) and conduct of minor significance (Chapter II
prohibition).
An agreement which infringes the Chapter I prohibi-
tion is void and unenforceable. Third parties who believe
that they have suffered loss as a result of an unlawful
agreement or conduct may have a claim for damages in
the courts under the terms of s 60, which requires the
UK authorities to deal with cases in a way which is con-
sistent with EC law.
Competition policy
The CA 1998 established the Competition Commission
(CC), which replaced the Monopolies and Mergers Com-
mission. The CC is an independent administrative tri-
bunal whose chairman and members are appointed by
the Secretary of State. The CC carries out two functions:
1 It hears appeals against decisions made by the OFT in
enforcing the prohibitions.
2 It investigates specific markets or the conduct of
companies or mergers, decides what is in the public
interest and reports to the Secretary of State with any
recommendations for action. It has no power to
initiate its own inquiries. Examples of investigations
include the supply of groceries by supermarkets, the
supply of new cars and the supply of airport services
by BAA in the UK.The Enterprise Act 2002
The EA 2002 made a number of significant changes to
UK competition law.
1 Office of Fair Trading (OFT). The EA 2002 abolished
the statutory position of the Director General of Fair
Trading and transferred his functions to the OFT, which
became a corporate body with effect from 1 April 2003.
The OFT consists of a Chairman, Chief Executive and
four other board members. One of the ways in which the
OFT carries out its functions is by undertaking studies
of markets which are not operating well for consumers.
These market studies are carried out by the Markets and
Policy Initiatives Division (MPI) and can result in a
range of outcomes including OFT enforcement action,
a market investigation reference to the CC, proposals
for changes in the law or publishing better information
for consumers.
2 Competition Appeal Tribunal. Part 2 of the EA
2002 established an independent Competition Appeal
Tribunal to replace the Competition Commission
Appeal Tribunal.
3 Mergers. Part 3 of the EA 2002 reformed the UK’s
merger control framework by replacing most of the
merger control provisions of the Fair Trading Act 1973.
The main provisions are:
■Decisions on mergers have been de-politicised; they
are now taken by the OFT and CC as independent
competition authorities rather than by the Secretary
of State for Business, Enterprise & Regulatory Reform
(formerly Trade and Industry).
■Mergers are considered against a new ‘competition
test’ rather than the wider ‘public interest test’ pre-
viously applied. Mergers will be prohibited if they
would result in a substantial lessening of competition
in a UK market. The competition authorities have
discretion to allow a merger even if there is a sub-
stantial lessening of competition where they expect
defined types of consumer benefit to result.247