The proposal, published yesterday as part of a Green Paper, aims to prevent practices such as refusing to supply goods or driving out competitors through predatory pricing. It also covers companies that use their market power to impose excessively high prices or refuse to sell one product unless customers agree to take another.
The Green Paper could lead to sweeping changes in legislation and much wider powers for the Office of Fair Trading. These may include the right to enter and search businesses to collect evidence.
The outcome of the consultation could have far-reaching effects in sectors including perfumery, where companies including Givenchy and Yves Saint Laurent have refused to supply Superdrug for allegedly not meeting their standards. Another potential victim is the photocopier industry, which has been looked at by the Office of Fair Trading for conditions that some suppliers attach to leasing their copiers.
A spokesman for the OFT said: 'These proposals could put us in the position of the European Commission, which can literally make dawn raids instead of just asking for information.'
One of the main options under consideration by the Department of Trade and Industry would prohibit abuse of market power so that companies found guilty could be penalised for past actions. This is a radical change from the present position, which relies largely on the imposition of future price controls and divestment of businesses.
In future, parties that are injured by abuse of market power may also be able to sue the guilty company and obtain orders restraining alleged harmful actions until an investigation is complete.
Neil Hamilton, the minister for corporate affairs, said: 'At the moment all you have to do is stop doing something and there is no further action against you. There is every incentive to carry on abusing market power until you are stopped.'
The approach would bring the UK more into line with the European Commission's system.
The Confederation of British Industry and the Institute of Directors welcomed the Green Paper.