In my opinion: Institute of Management companion John Bridgeman, director-general of the Office of Fair Trading, says the new Competition Act is an opportunity for UK firms

In my opinion: Institute of Management companion John Bridgeman, director-general of the Office of Fair Trading, says the new Competition Act is an opportunity for UK firms - Wednesday 1 March is a crucial day for UK businesses. On that day the Competitio

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Last Updated: 31 Aug 2010

Wednesday 1 March is a crucial day for UK businesses. On that day the Competition Act 1998 will come into force: this is a tough new law that prohibits firms from entering into and operating anti-competitive agreements, and from abusing their dominant position in a market.

The legislation promotes competition by providing better protection for the victims of anti-competitive activity, and, at the same time, provides stronger sanctions than ever before for businesses that harm competition.

The Competition Act 1998 is good news for UK businesses, for UK consumers and for the UK economy.

But if this legislation is such good news, why is it that so many UK businesses have done so little to prepare for it? Despite the best efforts of the OFT over the past 18 months or so, the worrying fact is that many businesses are simply unaware that new legislation is around the corner.

Others are under the impression that the Act will not affect them and that they need do nothing, and others still have just not got round to thinking about it yet. In my opinion, they are treading a dangerous path.

There are two reasons why businesses should find out about the legislation.

The more obvious reason, perhaps, is that businesses that are aware of the Act's provisions are in a much better position to avoid infringing its prohibitions in the course of their commercial activities. In turn, they will avoid the potentially very serious consequences of committing an infringement.

These include: the voidness and unenforceability of unlawful agreements; formal investigation by the Office of Fair Trading or one of the sector regulators, which may require significant management input; being sued for damages by those who consider themselves harmed by the unlawful agreement or conduct in question; and a financial penalty of up to 10% of the company's UK turnover.

In addition, there will inevitably be adverse publicity, which would be likely to dent the confidence of investors, lenders, customers and suppliers. And, focusing for a moment on financial penalties, it is worth bearing in mind that the Secretary of State for Trade and Industry has announced that a penalty should be calculated on the basis of the firm's UK turnover during the period of infringement, up to a maximum of three years. We are looking, potentially, at very substantial sums of money.

So much for avoiding infringements. The second reason for awareness is equally important. I have already mentioned that the Act provides better protection for the victims of anti-competitive activity. It gives me new powers to act swiftly to investigate complaints of anti-competitive activity and to take action against the perpetrators. But in order to take advantage of this protection, businesses need to know when to complain and the action that can be taken if they do so.

They should know that I will be well-equipped to pursue complaints of anti-competitive behaviour. I will have powers to require firms to produce documents and information to me; to enter premises to obtain the documents I require; and, under the authority of a court warrant, to enter and search premises.

These powers are backed up by a range of criminal sanctions for offences such as obstructing an investigation, tampering with or destroying documents, or providing false or misleading information.

And I will also have the power to take swift interim action - such as ordering the immediate suspension of an alleged anti-competitive agreement - to prevent the victims of anti-competitive behaviour from suffering further harm while an investigation is being conducted.

So there are two very good reasons why businesses should be making the effort to find out about the Competition Act 1998. But it need not necessarily involve a lot of effort on their part. The OFT has produced a wide range of free material to help businesses understand the new legislation, including a series of technical guidelines produced in conjunction with the sector regulators, a series of short booklets aimed at small and medium-sized businesses, and a video on compliance.

Moreover, my staff have been travelling the length and breadth of the country explaining the provisions of the legislation to members of Chambers of Commerce, trade associations and other bodies.

I urge businesses to take advantage of the assistance that is on offer.

Failure to do so could hit them hard in their pocket, either through a financial penalty imposed by me or through the effects of anti-competitive behaviour committed by those around them. The Competition Act 1998 represents an opportunity for UK businesses. I sincerely hope that they will be ready for it.

Copies of leaflets and guidelines on the Act are available free from the OFT on 0870 60 60 321. If you have any enquiries regarding the Act, would like a copy of the free video or would like to arrange a speaker on the Act, telephone the Competition Act enquiry line on 020 7211 8989 or e-mail HYPERLINK mailto: enquiries.competitionact@oft.gov.uk.

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