Three cheers for the Competition Bill

Lawyers should be welcoming, not attacking the competition Bill which is currently going through Parliament, says competition partner Marija Danilunas. Marija Danilunas is a partner in Hammond Suddards IP/ competition law group. A recent study found that 58 per cent of lawyers and 63 per cent of economists believed that the new Competition Bill 'would lead to damaging uncertainty'.

Fears were expressed that companies would stop entering competitive ventures, and that the Bill would have a 'chilling effect on innovation'.

Later, a rather defensive Minister of State, Ian McCartney, stressed the dialogue that had taken place between the Government, business, lawyers, economists, regulators, consumer groups and other interested parties. After so much dialogue, what then is the fuss all about?

Amid the controversy, it seems to have been overlooked that the provisions of the Bill have effectively been law in the UK for the past 40 years.

When the UK joined the EC, the provisions of the Treaty of Rome constrained all UK businesses which traded across borders.

Even purely domestically trading companies were restricted through national legislation such as the Restrictive Trade Practices Act 1976, the Resale Prices Act 1976, and other legislation which will be repealed when the Competition Act becomes law.

Rather than creating 'damaging uncertainty', the UK legislators have removed uncertainty by introducing provisions, which mirror EC anti-trust provisions, effectively harmonising its competition laws with the EC. We are the last member state to do so.

The prohibition provisions in the Bill are effectively the same as Article 85 and 86 of the EC Treaty. They prohibit any agreement between parties which sought to prevent, restrict or distort competition within the UK.

More importantly for businesses, the Government is considering providing automatic exemptions, if the agreement or activity is already exempt under EC law.

Lawyers and economists should welcome this single UK-EC analysis. It will lead to more, not less, legal certainty and simplicity.

How then can the new Bill have a 'chilling effect on innovation?' That particular phrase is generally used to attack compulsory licensing regimes, usually where copyright or patents have become industry standards and are being used to block innovation by competitors.

But in the new competition bill, compulsory licensing would be resisted and is limited to exceptional cases such as pharmaceutical inventions where the cost of research and development cannot be recovered unless a period of monopoly is given to the owner of the intellectual property rights.

On the other hand, we see Microsoft with its dominant market share of 80 per cent in the desktop computer market, seeking to spread that dominance into other areas served by the Internet. The result? Innovative IT companies are unable to compete.

UK lawyers and judges have historically failed to deal adequately with EC competition law both in courts and in commercial dealings. 'Euro-defences' which rely on EC law have been struck out of UK legal proceedings.

Corporate lawyers have compounded the problem by encouraging their clients to agree to lucrative commercial agreements with major competitors before a competition lawyer has checked whether it is legal.

A change in attitude on the part of UK lawyers may be all that is required for the new Bill to benefit UK business.

Competition law is not 'anti' competition. On the contrary, its purpose is to encourage the number of businesses competing against each other, not to kill them off by stifling innovation.