Juridification, Codification and Sanction in UK Competition Law
| DOI | http://doi.org/10.1111/1468-2230.00279 |
| Published date | 01 July 2000 |
| Author | Imelda Maher |
| Date | 01 July 2000 |
LEGISLATION
Juridification, Codification and Sanction in UK
Competition Law
Imelda Maher*
The Competition Act 1998 radically reforms United Kingdom (UK) competition
law displacing discretionary political action with more juridical norms based on the
European Community (EC) competition rules. Such alignment is not required
under EC law but in fact has occurred in most Member States1and in all those
countries seeking to join the EC in the near future.2The basis of British
competition law has shifted from a control of abuse system to a prohibition system.
Under the control of abuse system everything was legal until expressly declared
illegal. No penalties were imposed and decisions ultimately could be taken at the
political level by the Secretary of State. Under the new prohibition system
introduced by the Act breach of either of the two prohibitions on restrictive
agreements and abuse of dominance may lead to the imposition of substantial fines
in a manner similar to that found under EC law. This reform can properly be seen
as a seismic shift in the regulation of competition within the UK leading to a
juridification and codification of competition policy backed by a system of
sanctions. This article argues that this process of juridification has redefined the
role of the Office of Fair Trading (OFT) and created a very powerful regulator in
its Director General. Codification takes the form of the Act itself supplemented by
guidelines and for the first time a system of precedent through the now juridified
successor of the Monopolies and Mergers Commission (MMC) – the Competition
Commission (CC). While codification facilitates and emphasises compliance, the
Act also introduces strong investigative powers and sanctions. Finally, the article
concludes that soft harmonisation with EC norms does not lead to complete
harmony between the two systems of rules – nor should it. In fact, there is
continuing strength in the diversity that remains, leading to a greater bedding down
of the system into the domestic legal order thus ensuring its acceptance and
effectiveness, one where there is recognition that uniformity of legal norms across
legal orders is little more than a fiction and that there are aspects of the EC system
which can be improved on.
ßThe Modern Law Review Limited 2000 (MLR 63:4, July). Published by Blackwell Publishers,
108 Cowley Road, Oxford OX4 1JF and 350 Main Street, Malden, MA 02148, USA.
544
* London School of Economics. Thanks to Barry Rodger and Colin Scott for comments on earlier drafts.
1 See D. J. Gerber, Law and Competition in Twentieth Century Europe: Protecting Prometheus
(Oxford: Clarendon, 1998) 401; I. Maher, ‘Alignment of Competition Laws in the EC’ (1996) YBEL
223.
2 See J. Fingleton, E. Fox, D. Neven and P. Seabright, Competition Policy and the Transformation of
Central Europe (London: CEPR, 1995); R. Pittman, ‘Competition Law in Central and Eastern
The Ancien Regime
The former competition law system of the UK was a mixture of approaches
characterised by a multiplicity of institutions, limited or no sanctions for failure to
comply with the legislation, no power to secure interim measures pending
completion of often lengthy investigations, a case-by-case approach which did not
produce binding precedent and the presence of the Secretary of State at the
pinnacle of the enforcement pyramid3underlining the overtly political rather than
strictly legal nature of the whole competition regime.4There were broadly two
contrasting approaches with monopolies subject to an investigatory ex post system
of control while restrictive agreements were subject to a highly formalised ex ante
registration system. The Fair Trading Act 1973 governed both mergers and
monopolies. In relation to both, behaviour was presumed to be in the public interest
(as defined by the legislation and not limited to the protection and promotion of
competition5) until the contrary was proved following investigation. The monopoly
provisions, whereby a single dominant firm or an entire industry could be
investigated have been retained under the new system with strengthened powers of
investigation for the Director General of Fair Trading (DGFT). The key provisions
of the Competition Act 1980, now repealed, supplemented the 1973 Act by
allowing for investigation of anti-competitive practices by individual firms.6Under
both Acts the ultimate test was the public interest with the Secretary of State as
final arbiter.
With mergers, the notification system and presumption of the 1973 Act that all
mergers are in the public interest unless proven otherwise remains intact following
the 1998 reforms. Under EC law, mergers above certain turnover thresholds lie
exclusively within the competence of the EC Commission.7Thus, unlike rules
governing other aspects of competition, there is clear demarcation of jurisdiction
between national and EC authorities in relation to mergers. Perhaps because there
is no risk of a dual regulatory burden, member states, even while adopting Articles
81 and 82 of the EC Treaty retain merger rules that are very much sui generis. The
UK reflects this European trend.8
Europe: Five Years Later’ (1998) 43 Antitrust Trust Bulletin 179.
3 Even under the Restrictive Trade Practices Act 1976 – the most formalistic of the competition statutes
– the Secretary of State could decide that restrictions were not sufficient to warrant investigation
before the Restrictive Practices Court: see s 21(2) and (3). He could also exempt an agreement from
registration: see s 29.
4 For a concise historical account see generally D. J. Gerber, n 1 above, 207, 226. For a critique in the
light of the proposed reforms see G. Peretz, ‘Detection and Deterrence of Secret Cartels under the UK
Competition Bill’ (1998) ECLR 145.
5 See s 84. All matters relevant to the public interest could be considered but regard had to be given to:
effective competition between UK suppliers; consumer interests in relation to price, quality and
choice; cost reduction, technical development and reduction of entry barriers; balanced distribution of
industry and employment in the UK; export competitiveness. See generally, S. Wilks, In the Public
Interest: Competition Policy and the Monopolies and Mergers Commission (Manchester: Manchester
University Press, 1999).
6 M. Utton, ‘Anticompetitive Practices and the Competition Act 1980’ (1994) 39 Antitrust Bulletin 485.
7 Council Regulation 4064/89 of 21 December 1989 on the Control of Concentrations between
Undertakings [1989] OJL 395/1 as corrected and published in [1990] OJL 257/90 as amended by
Council Regulation 1310/97 of 30 June 1997 [1997] OJL 180/1. There are some exceptions to this
general rule see I. Maher, Competition Law: Alignment and Reform (Dublin: Round Hall Sweet &
Maxwell, 1999) 278.
8 The Labour Party had advocated changing the institutional structures for merger regulation and more
fundamentally, shifting the burden of proof so that mergers would be presumed to be against the
public interest until the contrary was shown. These proposals were dropped within weeks of the
Labour Party coming to power in 1997, see DTI Press Release P/97/366, 4 June 1997; G. Borrie,
July 2000] Competition Act 1998
ßThe Modern Law Review Limited 2000 545
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