| Unfair competition? • The law • Enforcement • How we can help • How to complain |
Unfair competition: the law protects your business
Unfair competition is a Reckon guide to complaining about anti-competitive conduct or regulations. This section outlines the key legal provisions that can protect your business.
Abuse of a dominant position
The Competition Act 1998 and Article 82 the EC Treaty incorporated in British law by the European Communities Act 1972 prohibit the abuse of a dominant position.
A dominant position in competition law refers to a situation where an enterprise is not constrained by competition. This might be, for example:
- A monopoly (e.g. a water company).
- A dominant position in a local market, if buyers will not travel long distances (e.g. for funeral services).
- A dominant position in supplying spare parts or intellectual property licenses, even if there is effective competition for the main product (e.g. a car maker).
- A discretionary power to determine who is allowed to supply in a market (e.g. on safety grounds).
Abuse of a dominant position is the misuse of the power associated with a dominant position. Examples include:
- Ceasing to provide services which have no effective substitute (including constructive denial through unfair prices) in a way that excludes competitors.
- Using a dominant position to exclude competitors, e.g. through predatory targeting of special offers.
- As a dominant supplier to a trade, setting prices and terms that place some customers or types of customers at a competitive disadvantage.
- Exploiting abnormal restrictions on competition, e.g. high prices that take advantage of illegal activity.
This does not mean that businesses do not have the right to choose their trading partners, to compete on price or capacity, to offer different prices to different customers, or to extract rents or profits. But those who hold a dominant position have a special responsibility not to use their dominant position for an improper purpose, or to use their power beyond what is needed for legitimate purposes.
Some conduct that may appear abusive might be justified by reference to specific legitimate purposes: this is known as objective justification. For example, excluding a contractor who failed a safety test may be justified, if the test in question is the least restrictive way of meeting a genuine safety purpose.
Agreements, cartels and conspiracies
The law prohibits agreements, decisions of trade associations and concerted practices that prevent, restrict or distort competition, unless they are justifiable in accordance with specific statutory conditions.
Unjustified anti-competitive agreements are unenforceable. Compensation can also be sought for harm caused by illegal practices.
Unjustified State aid
The EC Treaty also restricts State aid to enterprises. State aid means benefits (including tax concessions) given to specific enterprises. It excludes investment on the same terms as a private sector investor, and remuneration for public services on market-tested terms or on the basis of an objective assessment of expenditure requirements.
The European Commission has broad powers to approve State aid. But if aid has not been notified then repayment of the aid may be secured through the UK courts.
Anti-competitive conduct by State bodies
State bodies engaged in commercial activities (e.g. a local authority acting as a landlord) are subject to the same rules as private enterprises.
Bodies that discharge regulatory or administrative duties (e.g. liquor licensing) are not covered by competition law. But action is still possible under administrative law for unreasonable failure to take account of competition, as well as under EC law if international trade may be affected. In particular Article 86(1) of the EC Treaty extends the prohibition on abuse of a dominant position to some abuses of State power (see for example the Corbeau case).
In all cases involving State power, whether directly or through enterprises with special rights assigned by the State, public interest purposes might provide a justification for otherwise abusive acts. The law recognises justifications for the delivery of public services and for income raised for the State by fiscal monopolies.
Such justifications are limited by proportionality: only restrictions on competition that are necessary for the public interest purpose to be achieved are permissible.
Furthermore, even if a State restriction on competition is itself permitted, its exploitation by an enterprise (public or private) in a dominant position may still be abusive.
For more information
For an initial discussion of a case or to ask Reckon LLP to handle a complaint, please contact Franck Latrémolière (020 7841 5858) or Nicholas Francis (020 7841 5859), or e-mail f.latremoliere@reckon.co.uk.
This guide provides general information only. It is not a full substitute for professional or legal advice tailored to your circumstances.
