The Enterprise Act was passed on 7th November last year. Certain parts of it came into force on 1st April 2003, including giving the Office of Fair Trading (OFT) elevated status as an independent statutory body. The Act gives the OFT a greater role in ensuring that markets work well to the benefit of all.
The changes cover both competition law and the enforcement of consumer legislation and are, in summary:
The creation of a clear competition test for merger decisions, which takes politicians out of the merger process.
In the past, Ministers decided whether mergers should be cleared or referred to the Competition Commission (CC), and decided the final outcome following a CC report. In future, nearly all decisions will be taken by the OFT and the CC acting as independent authorities. Ministers will be involved only where there are defined public interest issues, such as national security. The test for a merger to be referred by the OFT to the CC is if there is, or may be expected to be, a 'substantial lessening of
competition'.
The introduction of criminal penalties for individuals who dishonestly engage in the worst types of cartels such as horizontal price fixing, limiting supply or production, market sharing or bid-rigging.
The OFT will investigate and the Serious Fraud Office (and the Lord Advocate in Scotland) will prosecute with the possibility of five years' imprisonment and an unlimited fine on conviction. Immunity from prosecution can however be granted to individuals who inform the OFT of a cartel and cooperate fully in the investigation - although Scotland offers less comfort for such whistle-blowers.
The Act gives the OFT the power to apply to the court for disqualification of company directors if their company breaches competition law and if their behaviour is such as to render them unfit to be directors.
The OFT, trading standards departments and certain other designated enforcers are given greater power by the Act to obtain court orders against businesses that break consumer laws.
The reforms establish a consistent enforcement regime, with a more streamlined and efficient procedure. These powers sit alongside existing regulatory and enforcement activities, but allow speedier action to stop a breach so that the interests of consumers will be better protected.
The Act allows designated consumer bodies to make a 'super-complaint' to the OFT where they believe that one or more features of the market is significantly harming the interests of consumers. When a super-complaint is made, the OFT must publish a response within 90 days explaining what it will do about the complaint.
The Act gives the OFT a revised power to make references to the CC when it has reasonable grounds to suspect that one or more features of a UK market prevent, restrict or distort competition. Such references might be made following an OFT market study.
The OFT can approve voluntary codes of practice which safeguard and promote consumer interests. To qualify for approval, a code must meet challenging criteria, designed to ensure that businesses provide benefits to consumers above minimum legal requirements. Approved codes can display an OFT logo, which will be promoted to consumers.
John Vickers, Chairman of the OFT said:
"The Enterprise Act coming into force on 20th June is a major milestone in the development of competition and consumer law. The Act, building on previous legislation, creates a clearer and sharper framework for markets and enterprise. Markets that work well are good for consumers and all the fair-dealing businesses that serve them well."
The Act's corporate and crown preference insolvency provisions are due to come into force in the summer – although the exact date has not been fixed. Individual and financial regime provisions will come into force at the start of the 2004 financial year.
