The DTI is consulting on whether certain exclusions from the Competition Act 1998 should be repealed. The consultation is part of the wider review on the implications of the 'modernisation' of EU competition law for the UK Competition Act (for more details on the EU modernisation proposals click here).
The consultation paper focuses on the following UK exclusions: the exclusion for vertical agreements, the exclusion for agreements given clearance under section 21(2) of the Restrictive Trade Practices Act 1976 and certain sector specific exclusions such as that for statutory audits.
Vertical agreements
Most vertical agreements (essentially supply agreements) are currently excluded from the Chapter I prohibition of the Competition Act. The Government believes that the exclusion should be repealed. The proposed repeal of the exclusion would lead to a significant increase in the number of agreements potentially covered by the Competition Act. The current UK exclusion for vertical agreements covers a whole range of everyday commercial agreements such as exclusive distribution, franchising, selective distribution and exclusive purchasing. The current exclusion is also clear and simple to apply providing certainty for business.
Assuming the current UK exclusion is repealed, supply agreements can still benefit from a 'safe harbour' from the chapter I prohibition and Article 81 if they meet the conditions of the EU block exemption for vertical agreements. However, the conditions for qualification under this block exemption are far more stringent and uncertain than those of the current UK exclusion. For example, qualification under the EC block exemption is dependent on falling below certain market share thresholds.
UK businesses which have relied on their supply arrangements being protected from the Competition Act by the vertical agreement exclusion therefore need to re-assess whether such agreements are at risk of breaching the Competition Act and if so whether they would qualify for protection under the EU block exemption (which provides protection not only from the EU but also the UK prohibition against anti competitive agreements).
Agreements given directions under section 21(2) of the Restrictive Trade Practices Act 1976
When the Competition Act was introduced, a separate exclusion was created for agreements benefiting from directions by the Secretary of State under section 21(2) of the RTPA, such that the restrictions or information provisions they contained were considered not to be of such significance to call for investigation by the Restrictive Practices Court. The majority of agreements made before the Competition Act came into force, which were filed under the RTPA, had the benefit of such section 21(2) directions and were considered generally not to be of concern under the new regime. The Government takes the view that to remove the exclusion now will have little adverse effect on business as many of these agreements may fall outside the Chapter I (and Article 81) prohibitions altogether because they are likely to have no appreciable effect on competition.
Comments on the DTI consultation on the repeal of the exclusions are invited by 12 August 2003.
Article by James Quinney, Susan Black and Kristien Geeurickx