Anti-competitive behaviour under the Enterprise Act

This article, based on UK law, first appeared in the Spring 2003 Issue of the OUT-LAW Magazine. It has not been updated since that date.

Arch-rivals Barbie and Sindy had a difficult time towards the end of last year. Mattel was accused of encouraging inappropriate behaviour because its latest model, Lingerie Barbie, "looks like a hooker," in the opinion of Children's charity Kidscape. But this was playground bullying compared to the trauma for Antitrust Sindy.

Sindy, Action Man, Twister and My Little Pony come from the stable of US toy giant Hasbro. In November, it was fined almost £5 million by the UK's Office of Fair Trading because the company had entered into price fixing agreements with distributors. This is the largest fine ever issued by the OFT. The action was taken under the Competition Act of 1998; but in the same month that Hasbro was fined, this law was fortified by the passing of the Enterprise Act, a move to crackdown even harder on such anti-competitive activity.

The Act was motivated by the Government's view that current fines did not sufficiently deter the worst forms of anti-competitive behaviour. It introduces criminal sanctions against individuals who set up and maintain socalled "hard core" cartels. These have nothing to do with Lingerie Barbie; rather, they are agreements to fix prices, share markets, limit production and rig bids. Those prosecuted of dishonestly engaging in "cartel activity" could face up to five years in prison and a fine. The Government estimates that the increased deterrent effect of these criminal sanctions will benefit the economy by £40 million to £50 million each year.

Individuals will benefit from new procedures that make it easier for them to claim damages for losses suffered due to anti-competitive behaviour; and consumer bodies will also be able to make claims on behalf of individuals who have suffered. In theory, individual victims of anti-competitive behaviour can already take action, but given that there have been no successful actions in the last 30 years, the Government acknowledged that new legislation was necessary. Under the Enterprise Act, consumer bodies can also make so-called "super complaints" to the OFT about features of a market which are harming consumers. This fast-track procedure will require the OFT to respond within 90 days.

To help authorities catch cartel activity, whistleblowers are encouraged by the new Act. The OFT has been given discretionary powers to protect informants from prosecution in England and Wales. Finally, the OFT can also seek disqualification of a director of a company (for a period of up to 15 years) where serious infringements of the existing competition law regime are established.

The DTI expects the Act to come into force in spring this year, although no date has been set at the time of writing. It is the Government's hope that these measures will play some part in strengthening competition in the UK and no doubt the OFT will be able to take a tougher stance against anticompetitive behaviour. The willingness of the OFT to do so became evident when it played Action Man against Hasbro.

For further information please contact: derek.stroud@pinsentmasons.com