What is antitrust?

What is antitrust?

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Antitrust is a word which originates from America and essentially refers to breaches of competition law. There are several antitrust principles used in the UK through competition law though, naturally, they are not identical to the US law.

Competition law is needed in order to protect the public from monopolies and cartels which can be created in a fully free market without regulation.

Whats a monopoly?

A monopoly occurs when one company is effectively the only supplier of a product in the particular market. A monopoly is bad for consumers because without competition a monopolistic supplier will be able to fix prices to whatever they choose. It will also be in a position to drop prices suddenly as soon as a potential competitor enters the market and then raise them again when the new company has been priced out.

Whats a cartel?

A cartel describes when several companies agree to fix prices; in normal market conditions they would have to compete for consumer business and would therefore have to drop prices to be competitive. By entering into a cartel all companies agree to fix the price so they all gain and the consumer loses out, having to pay more money for the goods.

The Competition Law Act

In the UK the Competition Law Act 1998 dictates rules in regard to fair competition between companies. It was been based almost entirely on European Community Law which aims to regulate the market to promote economic efficiency and protect consumers and traders.

Given the increasing globalised world we live in it makes far more sense for the European Community to be able to create laws in relation to anti-competitive practices as companies will often have a presence in many different countries.

EC law therefore dictates the terms of competition law both in the UK and the rest of the European Community. There are two main articles that deal directly with competition law in the EC: Article 101 which prohibits anti-competitive agreements between companies (e.g. a cartel) and Article 102.

Article101 (formally Article 81)

Article 101 prohibits anti-competitive practices between two undertakings (companies, partnerships and sole traders) that affects trade between countries in the EC and has the object or effect of preventing, restricting or distorting competition. Examples of this type of behaviour include price fixing, export bans on products and market sharing. In brief, any attempt at making an agreement (even if it is not in writing) that has some appreciable affect on the market for that particular product or service which either aims to, or does distort competition will be caught under Article 101. UK courts have the power to apply EC law and can therefore hold companies to account for breach of competition law.

Article 102 (formally Article 82)

Article 102 prohibits the abuse of one or more undertakings of a dominant position in the market insofar as it affects trade between states of the EC. A dominant position is loosely defined deliberately to include companies with a particular economic strength which enables them to effect competition by themselves whilst acting independently from consumers and competitors (e.g. a monopoly). Article 102 is therefore a protection for the consumer and for possible new companies looking to enter that particular market as it prevents price discrimination, predatory pricing and excessively high pricing.

If you would like to know more about competition law in the UK you should visit a local solicitor.

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