STATUTES
| DOI | http://doi.org/10.1111/j.1468-2230.1980.tb01602.x |
| Date | 01 July 1980 |
| Published date | 01 July 1980 |
STATUTES
COMPETITION
ACT 1980
THE
Competition Act is the result of a curious mixture of party
political and non-party political objectives. Politically, the Act makes
the statement that the way to fight inflation is not by price or wage
controls but by competition-induced cost reduction. Non-politically,
the Act attempts to plug some of the gaps
in
existing competition
law, the remaining plugs to be provided by another bill, probably in
the next session.' The joint effect of these objectives is the attain-
ment of another political goal-the reduction of public expenditure.
In legal terms the Act may be scrutinised under three headings: the
restriction of price control; the introduction of the anti-competitive
practice; the increased investigation of nationalised industries.
I.
The
Restriction
of
Price Control
The basic provision is the abolition of the Price Commission. This
body dates back to the Counter Inflation Act 1973 under which, with
the Pay Board, it was set up to administer successive pay and prices
codes. Its particular functions were to receive notifications of
proposed price rises in order to check that such rises complied with
the code, and otherwise to ensure that the code was adhered to.
Any breach could result
in
price restriction. In addition there was
a
special duty to investigate and report on specified price rises
referred by the Secretary of State for Trade. It is important to note
that the Price Commission in this initial conception was purely an
anti-inflationary device, performing a parallel function to the Pay
Board's holding down wages.
The Labour Government, returned in 1974, rapidly abolished the
Pay Board and pay control but retained the Price Commission in its
original role-section 3 of the Prices Act 1974 conferred the
additional power to restrict price rises not in breach of the prices
code
if
the Secretary of State could be convinced of exceptional
circumstances. The following year the Remuneration, Grants and
Charges Act entrusted the Commission with the weighty task of
monitoring the
"
Social Contract
"
by ensuring that wage rises in
breach of the guidelines were to be disregarded as an element in
the justification of price rises.
Thus by 1977 the Price Commission had become well established,
albeit in a limited The Price Commission Act 1977 broke new
ground in identifying price control with competition policy. Under
this Act the Price Commission retained its powers in regard to pre-
1
Some minor amendments to the Restrictive Trade Practices
Act
1976 regarded as
2
See its reports August-October 1977 (H.C.P.
117)
and November 1977-January
particularly urgent were added at a late stage:
ss.
25-30.
1978
(H.C.P.
287).
429
430
THE
MODERN
LAW REVIEW
[Vol.
43
notification, became able to investigate prices not subject to pre-
notification and by section
11
could undertake investigations into
prices in specified industries on reference by the Secretary of State.
These functions baldly stated have the appearance of mere price
control, but the difference arose in the criteria against which prices
had to be judged.
No
longer was profit margin the sole effective
criterion.
In
addition to allowing only those profits that an eficient
producer could justify, the Act laid down seven factors to be taken
into account by the Price Commission. Their effect has been
summarised by the Price Commission in this way:
“
The criteria require us to promote competition between
suppliers in order to safeguard the user of goods and services.
Where competition is restricted or cannot be promoted the
criteria require us to safeguard the user of goods or services
by restricting prices or charges to the level which ought to
prevail in
a
more fully competitive situation.”
There is, then, express recognition that lack of competition may
lead to high prices due to either or both inefficiency and monopoly
pricing, and that price control was to act as
a
substitute for com-
petition by restricting prices to those that an efficient producer
subject to competition, and making reasonable profits, would charge.
The first of the two Liesner Working Party reports on competition
policy echoed the view that price control is
a
necessary corollary
to competition law where competition itself is unable to operate,
a
view recently put forward within the
E.E.C.6
Given this consensus,
why did the Government decide to abolish the Price Commission,
and thereby the link between competition and price control? Four
reasons have been forthcoming.
First, it is argued that price rises do not cause inflation but are
merely symptomatic
of
it-competition is able to attack real causes
by eliminating inefficiency. Unfortunately this argument merely begs
the question, for the whole point is that where monopoly or oligopoly
exist competition is simply not possible or realistic.
It
is
not possible
where the barriers to market entry are inherent; competition law can
pull down artificial barriers by severing the ties between suppliers
and dealers, but it can do nothing against prohibitive entry costs,
saturation advertising and
so
on. It is not realistic where dominant
firms operate conscious parallelism, or where small firms opt to
follow prices charged by dominant firms-in both cases it is in
the interests
of
all to retain market stability. In short, the reaI
question is whether treatment of symptoms is justified where the
cause is beyond reach, a question which the Act answers in the
negative, Secondly, it
is
regularly pointed out that the
“
redefined
”
Price Commission did little
to
restrain prices. In its
44
reports under
sections
4
and
5
prices were, disregarding temporary freezes,
H.C.P.
654
(IY77-78),
p.
2.
4
Hereinafter Liesner
I,
Cmnd. 7198
(para.
4.13). Liesner
I1
is Cmnd. 7512.
5
United Brands
v.
Commission
119781
1
C.M.L.R. 429.
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