OFT to be given power to enter and search buildings

THE POWERS of the Office of Fair Trading are to be increased, allowing it the right to enter and search buildings to collect evidence of anti-competitive practices by businesses.

The Government has backed away from controversial proposals to stem abuse of market power and to introduce fines of up to 10 per cent of turnover for companies that abuse a dominant position in a market.

A Green Paper, published in November, outlined a list of options for strengthening the law against anti-competitive practice. As well as hefty fines, these included allowing those who feel injured the right to sue guilty companies. A further option was to prohibit abuse of market power so that companies found guilty could be penalised for past actions.

However, Neil Hamilton, the consumer affairs minister, said yesterday that after wide consultation he had rejected root-and-branch change in competition law. The increased costs to businesses that would have ensued were considered disproportionate to the likely benefits to consumers.

Mr Hamilton said the best solution would be to plug gaps in the existing system by increasing the powers of the OFT. Besides the right of entry and search, the director-general of fair trading will be able to prohibit specific activities by a firm while it is being investigated by the Monopolies and Mergers Commission.

He will also be able to demand undertakings from companies in lieu of an MMC reference, with any breaches enforceable in the courts.

Mr Hamilton admitted that the new rules would be less of a deterrent than fines or the prospect of private action by aggrieved parties. But the introduction of such measures could give rise to a 'Pandora's box' of rising costs that would ultimately be borne by consumers, he said.

The cautious approach will be seen as a victory for the Confederation of British Industry, which lobbied hard against more radical changes.