Fiddlers on the hoof

Here we go again. The tide is coming in. Some more European law has been converted into English legislation. As Lord Denning warned us in 1974: “When we come to matters with a European element, the treaty is like an incoming tide. It flows into the estuaries and up the rivers. It cannot be held back.”

So, on 1 March 2000, parliament gave effect to a bit more of the Treaty of Rome with the Fiddlers’ Act … or rather, the Competition Act 1998. This will outlaw any agreements, business practices and conduct that have a damaging effect on competition in the UK. This means that if you and I are Wigglepin suppliers in competition with each other, we can’t work a fiddle on prices; nor can I sidle up to you at the Royal Institute of Wigglepin Makers trade association and suggest we adopt some one-sided trade conditions or home-made “standard” form small print to crucify suppliers and subcontractors. Nor can you and I agree to control production supply, or divide up the market. Nor can we nudge-nudge, wink-wink agree to put certain customers at competitive disadvantage. In short, you are in real trouble if you take part in cartel activity such as price-fixing or market-sharing.

But it’s not just the odd conspiracy that is under the spotlight. The anti-competitive agreement has a twin. It is called the “abuse of dominant position”. This applies to an outfit that is so big, so powerful, that, quite independent of its competitors, it can dominate the market. These people, companies or utilities impose unfair prices on customers, or impose unfair trading terms on suppliers, or give trading advantage to sectors of industry at the expense of other sectors. In other words, they are so big that they can manipulate the market irrespective of their competitors.

And who is going to watchdog all this? The Office of Fair Trading is in charge. Its director-general, John Bridgeman, is cock-a-hoop. Hitherto, he has been defeated by his limp powers to suss out fiddles. Now, he says, he has “a shining array of sharp new implements”. For example, the “dawn raid” is an unannounced investigation whereby, without a warrant, Mr Bridgeman can authorise his officials to enter premises and demand to see any materials they like. Alternatively, he can apply to the court for sledge-hammer powers to bash down your office door and seize documents he needs. Ouch! I can’t help wondering if Mr Bridgeman will clash with Article 8 of the Human Rights Act, which entitles everyone to respect for their private life and correspondence. Further, the Human Rights Act says there shall be no interference by a public authority unless it is in the interests of the economic well-being of the country; I can see some great fights between these two pieces of legislation. Meanwhile, the Competition Act says it is a criminal offence to fail to comply with any investigation. One large firm of solicitors recommends a “dawn raid response plan”, so that relevant people within your organisation know what to do, given that there is a possibility of prison.

We can no longer nudge-nudge, wink-wink agree to put certain customers at competitive disadvantage

And what if you get caught as a company? Heavy fines, that’s what. Not long ago, breach of the equivalent act in Germany brought a well-known car company a £70m fine. In another case, a shipping company copped it for £191m. The UK legislation happily caps your fine at 10% of your annual turnover for every year of infringement up to three years. The director general says: “This could make a significant dent in a firm’s profits in a given year.” Damn right; it would probably put innocent employees out of their job too, to say nothing of the string of creditors left with unpaid bills. The fine could put folk out of business.

This competition law has been in Canada for 15 years, in most of Europe for 40 years, and in America for 100 years. So, I guess the UK will learn to live with it. Oh yes, I nearly forgot two other points; if you are a “professional” you are exempt from the ban on agreements, business practices or rules for the conduct of your professional body. But not from abusing your dominant position. So, architects, engineers and surveyors enjoy some form of relief, but I admit I don’t quite understand how that works. Relief also applies for barristers and solicitors, of course.