A Comparative Review of Competition Law Between UK and US

Introduction

Competition law is a law that promises to maintain the competition in the market by keeping away anti-competitive practices conducted by the companies. International trade law and competition law complement with each other because markets do not end at national borders. Hence, it consists of national legislations, regional, bilateral and multilateral agreements. The history dates back to Roman empire and after 20^th century it started receiving global recognition.[1] USA’s approach towards antitrust practices dates back to the 1800s. During that era ‘trusts’ had control over the various sections of the economy such as oil industry, steel industry, railways, etc. The US Steel and Oil had the monopoly over the market, which gave them the authority to control the availability of the goods and the pricing. There was no competition because one company ruled over the industries and small businesses were denied opportunity. People had no option but to buy from such leaders who were utilising their economic authority arbitrarily which made the American society vulnerable ultimately.

The rich became richer while the others suffered. Soon, these practices instigated the Americans to protest which led the then President Mr. Roosevelt too come up with various laws known as ‘antitrust laws’ which aimed at safeguarding the needs of the consumers by encouraging healthy competition in the market. Sherman Act was the first act regarding antitrust policies which was passed in 1890 which made agreements between different various companies to limit competition as illegal. The Clayton Act of 1914 supported the consumers by preventing such mergers and acquisition which would demote competition. The Federal Trade Commission Act of 1914 established a new administrative body to observe the unfair/antitrust practices conducted by the companies. The commission has the authority to look into the various matters to prevent unfair business practices committed by various companies.[2] UK, back in the 14^th century, action was taken against businesses that involved anti- competitive practices. In the year 1998 Competition Law Act was introduced and it is subsisting.[3]

The US Antitrust laws and UK’s competition law are considered to be most influential systems with regards to competition regulation. Antitrust laws are national but the competition issues extend on an international platform which gave rise to adverse economic effects in multiple jurisdictions. Hence, it was essential to come up with an international regulation. International competitions were proposed before inception of General Agreement on Tariffs and Taxes but they were not adopted and there were numerous attempts to address such matters. But after the establishment of World Trade Organisation, it adopted various provisions which deal with cross border competition issues on a sector specific basis. USA glorifies antitrust laws and its policies maintain a healthy competition between the various firms with respect to goods and services. United Kingdom has brought up radically transforming competition policy. UK and USA have varying perceptions with respect to their focus, that is, United Kingdom’s competition policy mostly focuses on the industry while United States’ antitrust policy mostly focuses on the consumers. But both of the nations’ competition law policies’ core lies on unreliability of concentration of excessive economic power. The World Trade Organisation plays the role of a catalyst to boost borderless global business environment.

USA Regulating Anti-Competitive Practices Amongst Various Companies

USA’s anti-trust law restricts anti-competitive practices and also prevents monopolistic and unfair trade practices. The laws are made to promote competition in the market place. The government and private competition regulators utilise antitrust and consumer protection rules with an attempt to prevent failure in market. The history of anti-competitive practices in USA dates back to Sherman Act of 1890 when the market of USA was controlled by few big trusts and they started dominating the market. Section 2 of the act makes monopoly illegal. Such laws are applicable to business and individuals. The Federal Trade Commission Act is enforced by Anti-trust division of Department of Justice and Federal Trade Commission to prevent anti-competitive practices; its Section 5 prevents unfair trade practices. The Clayton Act covers all such areas of competitive practices that are absent in the Sherman Act; for example: mergers promoting anti-competitive practices, Section 7 of the act prevents such mergers.[4]

Kodak Case- It was one of the famous companies on camera and film business. At a point of time, it held more than 96% shares in the market. Lawsuits were filed by multiple parties. It resulted in consent decree where the company was supposed to sell only its film and was restricted to have monopoly on all film made for photo and film. Then suits were filed when Kodak was the only company that could produce colour films and was exercising monopoly hence it had to issue licenses until 1994.

Standard Oil- This was one of the landmark cases for anti-competitive practices. It had a huge influence on the oil industry of the USA. The company was involved in abuse of dominance and was held liable hence; the company was broken down into 34 more companies which became the competitors.

Microsoft Case- The company had violated the first two sections of the Sherman Act and it had a monopoly over operating system and browser sales. Hence it was divided into various companies that focused on OSA and others dealt with manufacturing software components like Microsoft office and the Internet explorer.

Google Case- It is the most recent anti-trust case; the DOJ alleged that the company was abusing its dominant position which had an adverse impact on the competitors and the consumers. Google has a huge monopoly which it is maintaining it in an unlawful manner. It has a monopoly in terms of search services and search advertising.[5]

UK Regulating Anti-Competitive Practices Amongst Various Companies

UK has witnessed variety of changes in its competition law legislations. There are two kinds of statutes: Competition Act of 1998 and The Enterprise Act of 2002. Competition law policies in United Kingdom dates back during the era of King Henry III when Associate in Nursing Act was passed to regulate the prices of bread and beer with respect to corn. Penalties were imposed for breach of such policies. There was a statute during the 14^th century called out the forestallers as oppressors of the poor. During 1553 Great Britain was again introduced to tariffs for food to stabilize the fluctuations. Even Queen Elizabeth I had assured that no monopolies shall subsist. The previous legislations were not effective enough and had huge influence of politics. After the Competition Act came into existence it repealed the previous legislations. Section 2 of the act prohibits agreements that distort competition and Section 18 talks about abuse of dominant position. The Office of Fair Trade was ammunitioned with more new powers which assisted it in dealing with anti-competitive practices. Such practices include: abuse of dominance, cartel formation, etc. The Enterprise Act focused on mergers and made serious cartel formations to be punishable as per Section 190. It even gave the authorities the power to punish such directors who are responsible for such illegal conduct.

Marine Hose Cartel Case- It was a landmark case where a cartel was formed which consisted of 6 international suppliers of marine hoses. It existed for 20 years and was discovered only in 2006. Price fixing, bidding rigging and market allocation was involved. Multiple people were involved in this case and were penalised for the offence.[6]

Galvanised Steel Tank Case- The companies were involved in the supply of tanks for sprinkler systems. The third company was not involved in the cartel but had given the hint of the price bands and specific prices of bids were discussed. They were held liable for anti-competitive practice such as Price fixing.

Precast Concrete Drainage Products Case- Three firms were involved in this case; the firms deal with precast concrete drainage products. They were involved in price bidding and had shared confidential information with each other. They were punished under UK and EU’s competition law.

Secretary of State for Health v Servier Laboratories Ltd – The pharmaceutical companies had manufactured a drug and delayed its entry into the market which led the price of the drug become higher. They had committed anti-competitive activities by abusing their dominant position and they were penalised for the same.[7]

Comparison Of Competition Law Practices Between UK and USA

Implementation

Around 14^th century during the era of King Henry III, the first action against anti-competitive practices was taken in UK. While in USA to take action against the trusts that were having monopoly in the market of USA, Sherman Act was introduced. It was introduced around 1800s.

Form of Sanction

UK usually allows fines or financial sanctions as per Competition Act of 1998. While USA according to its antitrust laws considers cartel participation as a crime against property, for which the perpetrators are criminally liable to pay fines as well as imprisonment. US also has corporate fines for companies.

Nature or severity of penalty

UK usually penalises by charging certain percentage of company’s annual sales of the product during such infringement. USA imposes criminal penalties of even sometimes which can lead to 100 million. 10 years of imprisonment can also be imposed.

Liability

Usually the competition law of UK imposes fines on the undertakings. US impose fines on individuals and sometimes enforce imprisonment on the perpetrators.

Deterrence

UK imposes fine from the undertakings; certain percentage of company’s sales is imposed as fine as per Competition Act 1998; it is not strict and does not act as a deterrent. USA imposes imprisonment on the perpetrators which acts as a deterrent but it should only be imposed in hardcore infringements.

Role of International Organisations with respect to trade and competition

The world has become a small place because of globalisation and trade between various countries. The laws of a nation as well as international laws become applicable in such situations. When trade happens between countries there is high probability of anti-competitive activities between the companies. Since, these cartels are based on International waters; certain International bodies have to play an important role to regulate such competitions.

OECD

It is an organization that is based in Paris. It promotes economic growth along with maintaining financial stability so that it enhances the global economy. It assists in expansion of the economy for development of economic conditions. It helps in enlarging the world trade and protects from discrimination.

UNCTAD

It was created in the year 1964. It develops competition law policies and had developed a voluntary code. It aims to build up trade, finance, technology, etc. It gives opportunities to the developing nations in matters of trade and development. The organisation was established to do away with the disparity between developed and developing nations in terms of trade and practice. It had created a GSP scheme which was created to promote exports from developing nations.

WTO

The World Trade Organisation was created on the basis of liberalisation; similarly, the competition laws obtain similar aim from the WTO, which is liberalisation. There are many agreements by WTO which already deals with matter related to competition law; hence it is easy to implement international competition law. It enhances competition between firms; it assists in reducing anti-competitive activities by encouraging private and government’s measures. It encourages consumer welfare, economic development and economic efficiency.

International Competition Network

It is an informal virtual network which promotes cooperation between competition law agencies all over the world. It was made in the year 2001 and it deals with antitrust enforcement and policy issues. National and multinational organisations related to competition law can be a part of ICN. It even handles mergers and encourages competition advocacy.[8]

Conclusion/Recommendations

Competition law is important because it helps to regulate market power and it aims to safeguard the interests of the consumers as well as the manufacturers. The companies and firms indulge in abusing their dominance they NGO for dead rigging promote cartelisation and enter into anti-competitive agreements to attain profits which affects the economy of any country and if such companies are involved in multinational businesses it affects the market of many countries as well as it creates issues for the consumers. USA and UK both have their competition laws to regulate anti-competitive activities in their countries. The procedures of the countries and the enforcement agencies may be different but take action to attain the same goal which is to maintain competition in the market. There can be two recommendations:

1. UK can impose stricter punishments to perpetrators which will act as a deterrent to the companies from entering into such anti-competitive agreements on a future date.
2. USA must impose punishment on a case to case basis instead of imposing strict measures on maximum cases. Strict punishment must be imposed on extremely serious anti­­-competitive crimes.

[1] Sumita Patwari, Competition Law- A Transnational Perspective, SSRN, (2014).

[2] Jonida Lamaj, The Evolution of Antitrust law in USA, 13 European Scientific Journal, 4 (2017).

[3] Peter Freeman, The Role of Competition Law in UK Competitiveness, 15 Competition L.J. 179 (2016).

[4] Stephen Calkins, Competition Law in the US, SSRN, (2007).

[5] Thomas F. Nowland, Famous Antitrust cases of the last century, Nowland Law (Jul. 15, 2021, 3:52 PM), https://www.nowlandlaw.com.

[6] Admin, Marine Hose Cartel Proceedings, Lexology (Jul. 16, 2021, 12:47 PM), https://www.lexology.com.

[7] Secretary of State for Health v Servier Laboratories Ltd, [2020] UKSC 44.

[8] Andrew Rose, Which International Institutions Promote International Trade?, 17 Review of International Economics 20, (2003).

Author: Bahnidipa Roy 

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