Page 6: Anti-competitive practices
In a competitive market, companies can be expected to adopt policies intended to give them a competitive edge. This can lead to benefits such as improved efficiency and better quality goods.
Under the Competition Act, an anti-competitive practice is defined as any practice that has, is intended to have, or is likely to have, the effect of restricting, distorting or preventing competition. The Competition Act may appear to replicate the monopoly provisions of the Fair Trading Act, but it allows investigation into the specific conduct of an individual firm or group of firms, rather than a more general investigation of the market, as the Fair Trading Act requires of the MMC.
A company or group of companies must have 25or more of the relevant market and a minimum annual turnover of £10 million for the Competition Act to apply. Practices that may be acceptable in one market where competition is strong may be unacceptable in another where there is less competition. Such practices are often vertical restraints, for example, exclusive dealing arrangements where a customer deals solely with a single supplier.
If an anti-competitive practice is suspected, the Director General can conduct an initial informal enquiry. If these suspicions are confirmed, he can either accept binding undertakings that the practice will stop, or refer the case to the MMC, which examines the practice to determine whether it is anti-competitive and in the public interest. It is not the nature of the practice itself but its effect on competition which is the crucial factor in the MMC's investigation. The MMC then recommends to the Secretary of State what action, if any, should be taken to stop the practice.