A Comparative review of Competition Law between the US and the UK.
Competition law is an interesting area of law, merging the fields of law and economics. Protection of the practice of competition in a free market economy is the main objective of this field of law. Competition, in general, is a beneficial process and this is due to the fact that firms are stimulated to produce the top quality of goods and services in order to compete for customers. A major objective of competition law is to prohibit firms from engaging in conduct which will harm competition and interfere with the competitive process. Where a competing firm agrees to fix their prizes and cost or to divide the market, instead of competing resulting in eliminating important aspects of competition between them then the benefits of competition in the process will be lost. Eventually, the firms will become inefficient to satisfy customer’s needs. At the end, keeping these circumstances and objective in mind, for regulating competition in the market and to reduce all the practices in the market which were anti-competitive, a new and separate branch of law was emerged known as Competition law.
The concept of competition can be traced back to the period of the 18th century and was first brought into limelight by Adam Smith in his book entitled “Wealth of Nations” which was published the year 1776. Also, in the late 19th century, around the year 1890, the modern economic theory was recognised which resulted in drafting of the Sherman Act in the United States which was mainly focused on the activities such as distortion of market along with any anti-competitive practice and put a halt on it. In the North American part of the world it is known as the Antitrust Legislation. Many countries around the world got inspiration and adopted the concept of competition law and started drafting their own provisions in this field referring to the legislation so drafted by America to regulate the market efficiently.
Competition Law in USA
The Sherman Act, 1890 and the Clayton Act, 1914 are the two pillars that strengthened the foundation of the modern day competition law and both the acts were inaugurated in the US. The Sherman Act (1890) was a piece of legislation projected to foil unreasonable contract, combination or conspiracy in restraint of trade” as well as “monopolization, attempted monopolization or conspiracy or combination to monopolize.” Whoever violates this act, can be punished with imprisonment of either description for a term which may extend to 10 years with fine of $100 million for corporations and $1 million for individuals. The Clayton Act was passed by the U.S. Congress in the year 1914 and mainly addresses the practices which are not addressed under the Sherman Act and defines corrupt business practices like monopolies and price-fixing and upholds the rights of labour.
Although the European countries had various forms of rules and provisions regarding the regulation of monopolies and competition even with the rapid growth in development, the elements of the Sherman and Clayton Acts can be seen especially after World War II and the fall of the Berlin wall in the year 1990. After the second world war, the ally countries introduced rules and regulations to adjourn cartels and monopolies which were brought into being during the war years. This was primarily intended towards Germany and Japan. The large scale industry cartels were being manipulated in a way that was resulting in giving total economic control to the Nazi regime of the country was the main concern in case of Germany. In the case of Japan, big business was a source of nepotism which resulted in multi industry corporations which used to control the Japanese economy. After the admission of defeat by both Germany and Japan at the end of WWII to the allied forces allowed more strict controls to be enforced which were based on the principle of those being used in the US. The term “antitrust” which is also referred as “business trusts” are more ordinarily used denoting laws averting the formation of cartels. Though the antitrust laws and consumer protection laws are separate from each other, they have one thing in common that they both offer a protective measure to the consumers from unethical producers or suppliers who seek to monopolize a market sector.
The antitrust laws are applicable to a wide-ranging debatable business activities, including but not limited to market allocation, price fixing, bid rigging and monopolies. Market allocation, which is also known as a regional monopoly, is a structure formulated by two entities with an intention to keep their business activities to specific types of customers or geographic territories. The Federal Trade Commission which is more commonly referred to as FTC, found FMC Corp. guilty back in the year 2000 to be in cahoots with Asahi Chemical Industry to divide the market for microcrystalline cellulose which is used in pharmaceutical tablets as a primary binder. The Commission debarred FMC from distributing any Asahi products for a duration of five years and microcrystalline cellulose to any of the competitors for ten years in the United States. Bid rigging is an unlawful practice amongst two or more parties in which the losing parties will make lower bids consciously so that the winner can succeed in securing the deal. Price fixing takes place when the price of goods or services are fixed by a corporation purposely instead of letting the market forces to set it naturally. Several industries may come together to fix prices to safeguard cost-effectiveness. According to the FTC- “Price fixing is an agreement (written, verbal, or inferred from conduct) among competitors that raises, lowers, or stabilizes prices or competitive terms. Generally, the antitrust laws require that each company establish prices and other terms on its own, without agreeing with a competitor.” For instance, Apple was accused by the US. The Justice Department for manipulating the cost of e-books lost the price fixing appeal and was found liable to pay $450 million as part of settlement. In the case of Monopoly, no competition is faced by the seller as there is dominance of a sector by one company eliminating the competition as he is the sole seller with no close substitute in the market with the power to set the price for the goods. Microsoft was accused of pre-installing “additional programs” into the windows operating system and making it problematic for the consumers to install competing software on windows computers, constituting monopolistic actions.
Competition law in the U.K.
In the past 15 years, the British competition laws have gone through a lot of amendments as the system which was followed earlier for regulating completion laws came out to be unsuccessful as they were really complex to understand and mystifying to handle and now the current piece of legislation is drafted in two different statutes The Competition Act, 1998 and The Enterprise Act, 2002. The ruling classes of the competition didn’t have sufficient resources and neither the power to enforce the laws which were effective in nature and the land was deeply swayed by the politics. This resulted in many anti-competitive business practices unnoticed and the wrong-doers were getting succeeded without getting traced or punished. The Competition Act, 1998 repealed the majority of earlier provisions to provide an efficient legal system to the land of UK with the core objective of preventing anti-competitive practices in the marketplace. This act basically repealed the Fair Trading Act, 1973 which was passed with the view to provide a competition free environment. The Enterprise Act, 2002 is the key piece of UK legislation, mainly focusing on market competition and preventing unfair trade practises. The Monopolies Commission was renamed to Monopolies and Mergers Commission (MMC) which now had the authority to make market investigations and merger control. The MMC became the Competition Commission and in due course merged with the Office of Fair Trading (OFT) giving rise to the Competition and Markets Authority. The law gave powers to investigate and take action to the Competition and Markets Authority (CMA).
The ruling-out of the abuse of “dominant market positions” and “anti-competitive agreements” under the UK law were based on and strengthened by equivalent provisions given under the EU law. However, EU competition law is no longer enforced in the UK under the terms of the UK-EU trade agreements after Brexit. Completely separate competition regimes are carried out in the EU now. The Competition and Markets Authority (CMA) is currently in charge of all anti-competitive practises affecting UK markets and consumers. The Secretary of State for Business, Energy and Industrial Strategy urged the CMA to submit suggestions in August 2018 to strengthen public trust in markets and better safeguard consumers in the digital economy. In a letter to the Secretary of State in February 2019, CMA Chairman Lord Tyrie highlighted his proposals. John Penrose, a Conservative MP and UK Anti-Corruption Champion, put out a report on UK competition law reform in February 2021. Strengthening the CMA’s authority and simplifying present processes are among the proposals in the Penrose report. The majority of Lord Tyrie’s ideas from his 2019 letter were not implemented. The dominance of technology companies in digital marketplaces, as well as their ability to suffocate competition, are the subject of a global debate. A Digital Markets Unit (DMU) was established inside the CMA in April 2021, based on the recommendations of an expert panel and a Digital Markets Task Force. In essence, the CMA desired the ability to act more swiftly and decisively on competition concerns, as well as to have its consumer protection powers raised to the same level as its competition authorities. This keeps a record of and controls the actions of platforms possessing a significant amount of market power. In due course, the government plans to consult on the DMU’s design and legislation to place it on a formal basis.
The main objective of competition law is to make the market-place good for both customers as well as producers by making all dishonest competition and corrupt business practices illegal in nature, maximizing the welfare of consumers. The legislation solved the problems of small corporations and also restricted and put a limit to the competition in the market along with upholding the rights of labour and saving them from market manipulation. The provisions adopted are in accordance with the market structure from legislation of various jurisdictions. The competition regime in the UK started emerging only after the second world war and has been developed drastically. The United Kingdom only achieved a regulatory regime with a cohesive design and orthodox supporting reasoning with the passage of the Competition Act, 1998 and the Enterprise Act, 2002. These are the most important statutes for purely national dimension cases. However, if a company’s actions have a cross-border impact, the European Commission has jurisdiction to address the issue, and only EU law would apply. United States Antitrust law is one of the most influential systems of competition regulation. The Sherman Act was the first antitrust law which was passed by the Congress in the year 1890 targeting at preserving free and unfettered competition as the rule of trade. Subsequently two additional antitrust laws, The Federal Trade Commission Act and The Clayton Act were passed in 1914. Anti-competitive activities affect not just the ability of smaller businesses to enter or prosper in the market, but also consumer pricing, service quality, and innovation. To prevent infringing the law or being a victim of other’s anti-competitive conduct, businesses must be aware of the basic regulations. Infringements have serious consequences and are penalised severely.
Written By –
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