All set for tough new regime at the OFT

George Peretz examines the OFT preparations for the impending changes in the competition regulations. George Peretz is a barrister at Monckton Chambers, London.

Since the Competition Act was passed last month, the Office of Fair Trading (OFT) has been gearing up for a revolution in competition law.

The Director General of Fair Trading, John Bridgeman, says: “From 1 March 2000, the UK will move from having one of the most permissive competition regimes in the world, to one of the toughest.” The OFT has now begun the process of preparing itself and business for the new regime.

Businesses have a major task ahead of them. In the words of John Bridgeman: “Companies now have 15 months to conduct thorough compliance checks on their current trading practices and to train staff to comply with the new law.”

To help them, the OFT has allocated u1m for an education campaign for businesses likely to be affected by the new law. OFT officials have been busy attending conferences and seminars to explain the new rules.

The OFT has also issued a number of guidance documents to assist businesses, which are currently in draft form. These are all worth reading and are available on the OFT web site at www.oft.gov.uk/html.

General guidance on new prohibitions and matters such as market definition, which are crucial to understanding how competition legislation works, is provided in the draft documents.

In addition, they reveal the OFT's intended approach to issues such as refusal to supply, selective discounts, excessive prices, research and development and specialisation agreements. The OFT has also set out how it will deal with cases in which the European Commission is involved.

The new rules will also impact on trade associations. The OFT will need to look at rules, conditions of membership, codes of conduct, recommendations, standard terms and conditions, and practices such as the exchange of information.

The OFT outlines procedures in relation to the new rules, covering such matters as confidentiality and business's rights to view relevant OFT files.

In the main, the new OFT procedures will be in written form, with a limited role at best for oral representations. Appeals against OFT decisions lie with the new Competition Commission.

The OFT's powers of investigation and enforcement (including fining) are also outlined in its guidelines. Companies are encouraged to start setting up compliance programmes, as they will face lesser fines where a good compliance system is in place. The OFT has laid out what it expects to see in a compliance programme.

Cartel participants that “blow the whistle” on the cartel will also be rewarded with lower fines.

The OFT will also be issuing guidance on matters such as intellectual property licences, “vertical agreements” (such as agreements between suppliers and distributors) and mergers and acquisitions.

Businesses that want to know where they stand on particular agreements entered into on or after 9 November this year can now apply to the OFT for guidance on how these agreements are affected by the new regime. The OFT has issued a form for this purpose.

Of course, it is not just businesses that need to prepare for the new law. The OFT itself will have to make sure that it is in shape to deal with cases as soon as the new regime is up and running.

Under the old regime, OFT case-handlers were usually generalist civil servants, assisted by a small number of lawyers and economists.

This will all change. The OFT is set to recruit 50 new staff and has advertised for legally qualified case officers with competition law expertise. It will also train present staff in the law and economics, which they will require to administer the new system. The size of its cartels task force will be doubled to make full use of new powers it will have to detect and punish secret price-fixing cartels.

The next couple of years promise to be an exciting and dynamic time for UK competition law. It is likely that businesses and their advisers will begin to feel that they have fallen victim to the famous Chinese curse.

But lawyers have no excuse for ignoring the potential impact of the new law on their clients: the OFT has done everything possible in the transitionary period to provide information and guidance on the new regime.