United Kingdom competition law is affected by both British and European elements. The Competition Act 1998 and the Enterprise Act 2002 are the most important statutes for cases with a purely national dimension. However, prior to Brexit, if the effect of a business' conduct would reach across borders, the European Commission has competence to deal with the problems, and exclusively EU law would apply. Even so, the pre-Brexit section 60 of the Competition Act 1998 provides that UK rules are to be applied in line with European jurisprudence. Like all competition law, that in the UK has three main tasks. prohibiting agreements or practices that restrict free trading and competition between business entities. This includes in particular the repression of cartels. banning abusive behaviour by a firm dominating a market, or anti-competitive practices that tend to lead to such a dominant position. Practices controlled in this way may include predatory pricing, tying, price gouging, refusal to deal and many others. supervising the mergers and acquisitions of large corporations, including some joint ventures. Transactions that are considered to threaten the competitive process can be prohibited altogether, or approved subject to "remedies" such as an obligation to divest part of the merged business or to offer licences or access to facilities to enable other businesses to continue competing.
The Competition and Markets Authority enforces competition law on behalf of the public. It merged the Office of Fair Trading with the Competition Commission after the Enterprise and Regulatory Reform Act 2013 Part 3. Consumer welfare and the public interest are the main objective of competition law, including industrial policy, regional development, protection of the environment and the running of public services. Competition law is closely connected with law on deregulation of access to markets, state aids and subsidies, the privatisation of state owned assets and the establishment of independent sector regulators. Specific "watchdog" agencies such as Ofgem, Ofcom and Ofwat are charged with seeing how the operation of those specific markets work. The OFT and the Competition Commission's work is generally confined to the rest.
History
Legislation in England to control monopolies and restrictive practices were in force well before the Norman Conquest.Wilberforce (1966) p.21 The Domesday Book recorded that "foresteel" (i.e. forestalling, the practice of buying up goods before they reach market and then inflating the prices) was one of three forfeitures that King Edward the Confessor could carry out through England.Pollock and Maitland, History of English Law Vol. II, 453 But concern for fair prices also led to attempts to directly regulate the market. Under Henry III an act was passed in 126651 & 52 Hen. 3, Stat. 1 to fix bread and ale prices in correspondence with corn prices laid down by the assizes. Penalties for breach included amercements, pillory and tumbrel.51 & 52 Hen. 3, Stat. 6 A fourteenth century statute labelled forestallers as "oppressors of the poor and the community at large and enemies of the whole country."Wilberforce (1966) p.23 Under King Edward III the Statute of Labourers of 134923 Edw. 3. fixed wages of artificers and workmen and decreed that foodstuffs should be sold at reasonable prices. On top of existing penalties, the statute stated that overcharging merchants must pay the injured party double the sum he received, an idea that has been replicated in punitive treble damages under US antitrust law. Also under Edward III, the following statutory provision in the poetic language of the time outlawed trade combinations.27 Edw. 3, Stat. 2, c. 25
"...we have ordained and established, that no merchant or other shall make Confederacy, Conspiracy, Coin, Imagination, or Murmur, or Evil Device in any point that may turn to the Impeachment, Disturbance, Defeating or Decay of the said Staples, or of anything that to them pertaineth, or may pertain."
In 1553, King Henry VIII reintroduced tariffs for foodstuffs, designed to stabilise prices, in the face of fluctuations in supply from overseas. So the legislation read here that whereas,
"it is very hard and difficult to put certain prices to any such things... [it is necessary because] prices of such victuals be many times enhanced and raised by the Greedy Covetousness and Appetites of the Owners of such Victuals, by occasion of ingrossing and regrating the same, more than upon any reasonable or just ground or cause, to the great damage and impoverishing of the King's subjects."25 Hen. 8, c. 2.
Around this time organisations representing various tradesmen and handicraftspeople, known as guilds had been developing, and enjoyed many concessions and exemptions from the laws against monopolies. The privileges conferred were not abolished until the Municipal Corporations Act 1835. In 1561 a system of Industrial Monopoly Licences, similar to modern patents had been introduced into England. But by the reign of Queen Elizabeth I, the system was reputedly much abused and used merely to preserve privileges, encouraging nothing new in the way of innovation or manufacture.according to William Searle Holdsworth, 4 Holdsworth, 3rd ed., Chap. 4 p. 346 When a protest was made in the House of Commons and a Bill was introduced, the Queen convinced the protesters to challenge the case in the courts. This was the catalyst for the Case of Monopolies or Darcy v Allein.(1602) 11 Co. Rep. 84b The plaintiff, an officer of the Queen's household, had been granted the sole right of making playing cards and claimed damages for the defendant's infringement of this right. The court found the grant void and that three characteristics of monopoly were (1) price increases; (2) quality decrease; and (3) the tendency to reduce artificers to idleness and beggary.
This put a temporary end to complaints about monopoly, until King James I began to grant them again. In 1623 Parliament passed the Statute of Monopolies, which for the most part excluded patent rights from its prohibitions, as well as guilds. From King Charles I, through the civil war and to King Charles II, monopolies continued, especially useful for raising revenue.e.g. one John Manley paid £10,000 p.a. from 1654 to the Crown for a tender on the "postage of letters both inland and foreign" Wilberforce (1966) p. 18 Then in 1684, in East India Company v Sandys(1685) 10 St. Tr. 371 it was decided that exclusive rights to trade only outside the realm were legitimate, on the grounds that only large and powerful concerns could trade in the conditions prevailing overseas. In 1710 to deal with high coal prices caused by a Newcastle Coal Monopoly the New Law was passed.9 Anne, c. 30 Its provisions stated that "all and every contract or contracts, Covenants and Agreements, whether the same be in writing or not in writing... are hereby declared to be illegal." When Adam Smith wrote the Wealth of Nations in 1776Adam Smith, An Enquiry into the Wealth of Nations (1776) he was somewhat cynical of the possibility for change.
"To expect indeed that freedom of trade should ever be entirely restored in Great Britain is as absurd as to expect that Oceana or Utopia should ever be established in it. Not only the prejudices of the public, but what is more unconquerable, the private interests of many individuals irresistibly oppose it. The Member of Parliament who supports any proposal for strengthening this Monopoly is seen to acquire not only the reputation for understanding trade, but great popularity and influence with an order of men whose members and wealth render them of great importance."
Classical trade theory
The classical British perspective on competition was that certain agreements and business practice could be an unreasonable restraint on the individual liberty of tradespeople to carry on their livelihoods. Restraints were judged as permissible or not by courts as new cases appeared and in the light of changing business circumstances. Hence the courts found specific categories of agreement, specific clauses, to fall foul of their doctrine on economic fairness, and they did not contrive an overarching conception of market power. Adam Smith rejected any monopoly power on this basis.
"A monopoly granted either to an individual or to a trading company has the same effect as a secret in trade or manufactures. The monopolists, by keeping the market constantly under-stocked, by never fully supplying the effectual demand, sell their commodities much above the natural price, and raise their emoluments, whether they consist in wages or profit, greatly above their natural rate."Smith (1776) Book I, Chapter 7, para 26
In The Wealth of Nations (1776), Adam Smith also pointed out the cartel problem, but did not advocate legal measures to combat them.
"People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices. It is impossible indeed to prevent such meetings, by any law which either could be executed, or would be consistent with liberty and justice. But though the law cannot hinder people of the same trade from sometimes assembling together, it ought to do nothing to facilitate such assemblies; much less to render them necessary."Smith (1776) Book I, Chapter 10, para 82
Smith also rejected the very existence of, not just dominant and abusive corporations, but corporations at all.Smith (1776) Book V, Chapter 1, para 107
By the latter half of the nineteenth century, it had become clear that large firms had become a fact of the market economy. John Stuart Mill's approach was laid down in his treatise On Liberty (1859).
"Again, trade is a social act. Whoever undertakes to sell any description of goods to the public, does what affects the interest of other persons, and of society in general; and thus his conduct, in principle, comes within the jurisdiction of society... both the cheapness and the good quality of commodities are most effectually provided for by leaving the producers and sellers perfectly free, under the sole check of equal freedom to the buyers for supplying themselves elsewhere. This is the so-called doctrine of Free Trade, which rests on grounds different from, though equally solid with, the principle of individual liberty asserted in this Essay. Restrictions on trade, or on production for purposes of trade, are indeed restraints; and all restraint, qua restraint, is an evil..."Mill (1859) Chapter V, para 4
Restraint of trade
The English law of restraint of trade is the direct predecessor to modern competition law."the modern common law of England [has] passed directly into the legislation and thereafter into the judge-made law of the United States." Wilberforce (1966) p.7 Its current use is small, given modern and economically oriented statutes in most common law countries. Its approach was based on the two concepts of prohibiting agreements that ran counter to public policy, unless the reasonableness of an agreement could be shown. A restraint of trade is simply some kind of agreed provision that is designed to restrain another's trade. For example, in Nordenfelt v Maxim, Nordenfelt Gun CoNordenfelt v Maxim, Nordenfelt Gun Co AC 535 a Swedish arm inventor promised on sale of his business to an American gun maker that he "would not make guns or ammunition anywhere in the world, and would not compete with Maxim in any way."
To be considered whether or not there is a restraint of trade in the first place, both parties must have provided valuable consideration for their agreement. In Dyer's case(1414) 2 Hen. 5, 5 Pl. 26 a dyer had given a bond not to exercise his trade in the same town as the plaintiff for six months but the plaintiff had promised nothing in return. On hearing the plaintiff's attempt to enforce this restraint, Hull J exclaimed,