A new tribunal will also be established that for the first time will allow large fines - up to 10 per cent of turnover - to be levied in Britain against cartels. At the moment, only the Brussels competition authorities can fine cartels.
The plans, in a long-awaited consultative document, will allow the OFT to search offices, take away papers and ban predatory pricing and other similar abuses immediately they are discovered.
They were proposed in outline in government papers in 1989 and 1992 but have so far failed to reach the statute book despite strong pressure from the OFT and the Monopolies and Mergers Commission.
The Department of Trade and Industry gave no date for legislating but insisted that the consultative document showed the Government's intention of implementing changes as soon as possible.
The document immediately led to a row between BT and Don Cruickshank, the telecoms regulator. BT, headed by Sir Iain Vallance, said the reforms conflicted with proposals put forward by Mr Cruickshank for a new fair trading provision in telecoms regulation.
The Government has proposed a right for companies to have OFT decisions reviewed by an independent tribunal and for points of law to be referred to the High Court on appeal. But Oftel had rejected similar proposals by BT. The Government is also proposing an updating procedures for controlling abuse of dominant position. BT said similar proposals put to Mr Cruickshank had also been rejected.
However, a spokesman for Mr Cruickshank rejected the criticisms and pointed to a section in the consultative document that says the position of regulated utilities is "quite distinct" from general competition law. The section appears to wash its hands of the dispute between BT and its regulator by saying that existing legal procedures are sufficient to resolve the issue of new powers.
A key proposal in the government document is reform of the Restrictive Trade Practices Act, to bring it into line with the European Commission approach, which allows immediate bans of unacceptable practices.
At the moment, restrictive agreements have to be sent through the time- consuming processes of the restrictive practices court before anything can be done.
The prohibition approach has not been extended to abuse of market power, but the OFT has been given new powers to demand information, search, and take or copy papers.
A third innovation is to give the OFT powers to issue interim orders to stop anti-competitive behaviour while it investigates. Finally, a new form of tribunal will be established which is an appeal body and can also fine companies up to 10 per cent of turnover.