The Competition Bill, scheduled to get its first reading shortly, will give the Office of Fair Trading (OFT) the power to levy fines equivalent to a tenth of the value of their sales on companies found guilty of operating anti-competitive and price-fixing agreements. Officials will also have the authority to forcibly enter premises without warning, remove documents and question executives on pain of criminal penalty.
According to the CBI, the bill contains draconian powers going beyond even those contained in the European Union law, on which the new legislation is based. Rufus Ogilvie Smals, head of legal services at GKN and chairman of the CBI's competition panel, said the only equivalent in UK law was the powers Customs and Excise investigators had to tackle drug smugglers.
"These powers are genuinely extreme. They go well beyond the powers given to European Commission officials which are already thought to be fairly swingeing." He added that the fines should be limited to a maximum of pounds 1m.
But the Department of Trade and Industry (DTI) rejected the complaints, saying: "We believe these powers are necessary. Yes they are tough but cartels tend to be secretive." Nigel Griffiths, the minister for competition, has said the days of firms being able to use bullying tactics are numbered.
However, the CBI also complains that the Bill, modelled on Articles 85 and 86 of the Treaty of Rome, would expose companies to the "double jeopardy" of being investigated by competition authorities in Brussels and London and give consumer groups unwarranted rights to appeal to the proposed new Competition Commission against rulings by the OFT.
Another of its main criticisms is that the bill would impose a blanket ban on abuse of dominant positions by companies with large market shares. The same provision exists under Article 86, but the CBI said it was largely discredited and had only been used on 15 occasions.
The employers' organisation wants the clause dealing with abuse of dominant position to be defined more specifically to outlaw particular behaviour such as predatory or discriminatory pricing. It has suggested adopting the model used in Canada.
However, the DTI pointed out that in an earlier statement the CBI itself had said it "broadly supports basing the prohibition system for restrictive practices and monopoly abuse on the EU system set out in Articles 85 and 86 of the Treaty of Rome".
The department also said that many UK businesses were already familiar with Article 86-type prohibition since European Community law applied in the UK.
The CBI broadly supports the abolition of the Restrictive Trade Practices Act and its replacement with a general prohibition on agreements that were likely to have an adverse effect on competition. But it said it was anxious to see a distinction drawn between EU and UK law so that companies seeking exemptions from the provisions could not be investigated by the OFT even though they had notified Brussels.
It also said that the Government's estimate of the costs were far too low. The draft bill, published in August, put non-recurring costs at pounds 1.2m and recurring costs at pounds 1.4m annually and estimated the cost per firm at pounds 16,000 on the basis that only a few hundred employers would actually be affected.
The DTI pointed out that it had already taken a number of the CBI's observations on board during the consultation exercise.A spokesman added that the Government would be prepared to consider amendments to the bill as they were tabled.Reuse content