Magazine article Management Today

In My Opinion

Magazine article Management Today

In My Opinion

Article excerpt

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 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. …

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