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This article provides an insight into the anti-competitive agreements and how they are being regulated across the world by having a close look at three jurisdictions namely, US, UK and EU.
Introduction
People have resorted to the law for any sort of problem pursuant to which the legislatures, all over the world, have framed various laws for the well- being of their citizens irrespective of them being a natural citizen or juristic citizen. All the citizens are free to earn their livelihood with the help of any lawful means.
Everyone has to face competition in the market to emerge as successful and efficient. But such a competition should be non- arbitrary, reasonable and fair in nature leading to which a tremendous growth has been seen in the adoption of Competition Law during the past few years.
Various geographical regions all over the globe are seen to adopt the competition law and they brought their economies under the provisions of the competition law. Gradually, the market failures, abuse of dominance and other ill- practices in the form of any anti-competitive policy and so on were made subject to the competition laws and policies. It is realized that the implementation of the competition law is a need of the hour and not a privilege.[1]
The necessity was to regulate the competition in the market so that any company or any enterprise is not able to destruct any other person in the market for satisfying its own demands or reach the zenith of success. And eventually to conduct and regulate competition in the market and to put a sword on all the anti-competitive practices in the market, a separate and new branch of law has come upfront, namely Competition Laws.
A separate branch of law which has been drafted to put a halt to all the activities focusing on the distortion of the market with the help of any anti-competitive practice. This law is also known as Antitrust legislation in the North American part of the world.[2]
I. Competition Laws in the US
The modern competition law finds its roots from the legislations of the United States, where Sherman Act was brought in 1890 itself due to the raising concerns regarding the formation of trusts by the companies regulating in the American market. The US Congress had drafted three different legislatures namely, Sherman Act in 1890, the Clayton Act in 1914 and the Federal Trade Commission Act in 1914.
Though short and simple in nature, the very first legislation i.e, the Sherman Act of 1890 has emerged as the most important one. The Antitrust law of America had emerged not only as a law but also gave a socio-political picture to our society.[3]
The high concentration of competition amongst the American industries was diluted for a considerable period with the help of the political consensus which got reflected in the law.[4] The Antitrust law found its application for the protection of the core republican values with respect to the free enterprise in America and was designated as a “Charter of freedom” by its Supreme Court.
The fundamental principle that Sherman Act had thrown in the market was that it had put a bar on the formation of the agreements by one or more competitors that restricts competition in the market. The Act had also rejected the idea of monopolies in the market if such a company is not competing fairly in the market or had resorted to cheating. The Act had also provided heavy monetary fines or even jail for anyone who had violated its provisions.
The Sherman Act finds its roots in the criminal law and pursuant to which, it always requires the proof of collusion of a higher degree. There are a lot of approaches prevalent in common law, from where the US developed the ‘rule of reason’.
In 1911, in the matter of Standard Oil Co. of New Jersey v. United States,[5] the Court held that any kind of unreasonable or undue restraint is to be declared illegal. Hence, any kind of agreements which are anti-competitive and pro-competitive in nature has to be weighed against each other, to come at a point of determination of competition, enhanced or reduced by those agreements.
The Clayton Act got passed in 1914. Business practices in America were very dynamic in nature. The Act gave protection to the customers in America from mergers or acquisition that aims at restricting competition in the market.
However, with the implementation of the Federal Trade Commission (FTC) Act in 1914, a completely new administrative body was set up to regulate all the unfair business practices in the market. Not only this but the new Act had also empowered the Authorities to go with the investigation and to stop all the deceptive practices and unfair strategies of competition.[6]
Per se Approach
Some cases have been analyzed to find out the nature of restraint being so anti-competitive that such agreements have to be declared unlawful and illegal per se. In America, the rule of per se states that there are certain categories in antitrust laws relating to the anti-competitive behaviour for which there is a presumption that they would be anti-competitive in nature and thus, put an unreasonable restraint on trade.
There are a lot of reasons due to which the Courts disapprove the restraint put on per se violation of competition law. These reasons, for instance, comprises of pernicious, manifestly competitive, naked or by even those restraints that harm competition.
Normally, when the competitors come together to form horizontal agreements, it falls under the ambit of the illegal approach of per se. Some of these activities include tying arrangements, group boycotts, division of geographic market, price-fixing and so on. The US Court in the matter of Northern Pacific Railway Co v. United States[7] held that there exist certain types of practices or agreements, which do not have any redeeming virtue but produce a pernicious effect on the competition in the market, fall under the ambit of unreasonable and illegal agreements.
II. Competition Law in the United Kingdom
The competition laws in the UK has seen a lot of changes in the past 15 years and the current law was drafted in two different statutes, namely the Competition Act of 1998 and the Enterprise of 2002. The earlier system of regulating competition in the UK came out to be ineffective, confusing to handle and difficult to understand.
The Competition Authorities were not granted with the power and sufficient resources for the enforcement of the law in an effective manner and the land was deeply influenced by politics. Hence, many of the practices dealing with anti-competitive business were undetected, unpunished and flourished.
The Competition Act of 1998 went on repealing many of the earlier legislation, to provide the land of UK with a more efficacious and efficient legal system. It led to the creation of new powers for the Office of Fair Trading (OFT) which helped the department to fight illegal and harmful anti-competitive practices such as abuse of market dominance and cartels to name a few.
The Enterprise Act, which was passed in 2002, had been drafted with a focus on putting a halt on the mergers and replacing the old provisions of the Old Fair Trading Act of 1973. The Act had also brought the punishment of a maximum 5 years for all those individuals who were responsible for serious cartel offences.[8]
The Act had also empowered the system to disqualify all those individuals to act as directors, who have been found guilty of infringing any relevant provision of competition law. Both the laws had provided a world-class system of the Competition law.
III. Competition Law in the European Union
The Commission in the European Union was of the view that there should be an objective directed towards the welfare of consumers and this can be seen even when the key terms like restriction were put on competition,[9] improving the distribution or production of the goods along with the promotion of economical or technical progress.[10]
The Commission is also empowered to impose fines amounting to 10 per cent of the total turnover of the undertaking that was produced in the last financial year as a result of breaching competition law that prohibit restrictive agreement and cartel. National Authorities have been provided with similar kind of powers.
If a company willingly discloses the presence of cartel to the Commission, such a company can get the benefit of either reduction in fine or complete immunity from the fine that is to be imposed under the leniency policy imposed by the Commission.
The complete details about the cartel have to be revealed by the applicant applying for such leniency and have to provide full cooperation to the Commission during its investigation. Further, the third party that has to suffer a loss on account of actions that fall under Article 101 of the Competition Law of EU, is free to bring a suit of private damages before their respective national courts.
However, if a company enters into practice or an agreement that contributes in promoting the economical or technical progress or improving the distribution or production of goods and consumers, are also allowed to share the benefit of such an agreement and such an agreement does not put such undertakings at a position from where they can eliminate the competition in the market for that particular product or does not empower them to impose any kind of restriction which cannot be done away with, for achieving those objectives.
[1] Speech by Vinod Dhall at a workshop conducted on “Competition assessment analyses; Instrument for competition advocacy”
[2] 7, Journal of European Competition Law & Practice, William H. Rooney et al., Getting Closer? The Application of Competition Laws to Regulatory Bodies in the USA and the EU, 2016, 267-273
[3] T. Sullivan, The Political Economy of the Sherman Act: The first one hundred years, 1st ed, 1991, p.3
[4] Barry J. Rodger and Angus MacCulloch, Law and Policy, 2nd ed. 2006, p.15.
[5] 221 U.S. 1 (1911)
[6] Csongor István Nagy, EU and US Competition Law (Taylor & Francis) (2016)
[7] 316 U.S. 346 (1942)
[8] Amended by the Robinson- Patman Act.
[9] Article 101 (1) of European Competition Law
[10] Article 101 (3) of European Competition Law