Outlook: Nothing to fear from the competition bill

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The Independent Online
Adair Turner, director-general of the Confederation of British Industry, has a recurring nightmare. He is woken at five in the morning by the sound of a sledgehammer coming through the front door. He goes downstairs in his pyjamas to discover a team of official-looking types rifling through his papers. When he protests, he is warned that failure to answer their questions may result in criminal prosecution. They prepare to leave, clutching several boxes marked Monthly Industrial Trends Survey. As they walk out, taking care to put the door back on its hinges, their leader, a surly fellow called Bridgeman, turns and says the CBI has been abusing its dominant position in the supply of fatuous economic reports for far too long. Later that day it is fined 10 per cent of its turnover.

The CBI does not much care for the Goverment's new Competition Bill, which was published yesterday and gets its second reading in the House at the end of the month. It thinks the powers it contains are draconian, parts of the legislation unenforceable and the costs of compliance totally unreasonable.

This is quite a turnaround. It was only a few months ago that the organisation welcomed with open arms the Government's determination to sweep away the anachronistic and ineffectual mechanism of the Restrictive Trade Practices Act and put UK competition law on a modern footing based on Articles 85 and 86 of the Treaty of Rome.

As the fine print of the Bill has emerged, however, the business community has become more and more frantic. A horrible vista is conjured up of companies being subjected to the double jeopardy of regulation by London as well as Brussels, of consumer organisations pursuing businesses relentlessly through the courts, and of over-zealous antitrust officials plundering their way across the industrial landscape in a never-ending orgy of dawn raids.

Reform competition law by all means, but do we have to be so heavy handed? You bet. By coincidence, on the very day the Bill was published, the Restrictive Practices Court finally got around to making orders against 13 companies operating a price-fixing cartel in ready mixed concrete - nine years after the case commenced.

In its tirade against the Bill, the CBI has largely missed the point that the legislation is actually about deterrence, not punishment. The form-filling nature of the existing legislation has made it simple for any executive with half a brain and a smart lawyer to draft a way around its provisions and the OFT's lack of teeth has meant that cartels only got their comeuppance when the boys from Brussels came calling.

The new legislation has swiftness of action and stiffness of penalty on its side - which should be enough to deter all but the most dedicated cartels. Moreover, businesses themselves will be the beneficiaries as much as consumers, since cartels do not discriminate between categories of victim.

The Bill, as it was first drafted, may not have been perfect in all respects and there will be further amendments as it passes through its parliamentary stages. But the CBI's argument that the Bill should be made more, not less, prescriptive in the contentious area of abuse of dominant position, for example, sits oddly with its general philosophy on regulation.

The DTI may yet find that its latest estimates of compliance costs are still too low, but the benefits which should flow from more effectively regulated markets should far outweigh these concerns. Well run businesses should have nothing to fear from the legislation. The CBI ought to be applauding, not sniping from the hills.