Definition
Broadly defined, competition law seeks to maintain effective levels of competition within markets. Underpinning competition law is the assumption that ‘competition’ itself is indispensable for collective consumer welfare, a fair equilibrium of prices, improved innovation and R&D, and a high quality of products/services.
Competition law tends to prevent, identify, and/or remedy:
(i) any agreement or equivalent with the ‘object or effect’ of preventing, restricting, or distorting competition within a particular market;
(ii) an abuse of a dominant market position;
(iii) an illegitimate merger; or
(iv) an inappropriate use of state subsidy/state aid.
At its broadest, this can take the form of a ‘market study’ or ‘investigation’, diagnosing the level and distribution of competition across an entire market. The forms that such infringements can take are diverse, with examples including ‘price-fixing’, ‘exclusive purchasing’, ‘exclusive distribution’, and – at an extreme – cartel arrangements.
However, competition law is far from as simple as restriction, deterrence, and punishment. The role of competition law authorities (and, in turn, of individual businesses) is to assess whether any restriction on competition is outweighed by corresponding benefits for the relevant consumer. Competition law thus balances effective market competition with various social goals that rely on business-to-business cooperation (e.g., sustainability initiatives).
Commercial Implications
The prospect of an infringement of competition law is one of the most significant forms of ‘risk’ that businesses have to navigate. This is caused – in part – by the significant investigative and enforcement powers held by the UK Competition and Markets Authority, including dawn raids, extensive fines (including 10% of global turnover), voiding of commercial agreements, and even criminal penalties for culpable individuals. Moreover, the effects on a business or multi-jurisdictional entity can reverberate in the longer-term, with a loss of commercial agreements, third party liability, compromised reputation, legal expenses, the distraction of senior company officials, and further legal proceedings initiated by related clients.
Competition law channels competitive energies and commercial ambition into a game where the rules are fair and the route to victory is through – rather than against – consumer benefit. Therefore, to prevent legal proceedings, businesses are incentivised to educate their workforce on best practices for compliance, developing specific protocols as safeguards, and proactively scrutinising M&A deals, commercial decisions, and supply/distribution chains, with a multi-jurisdictional awareness if necessary. However, question marks remain whether competition law is effective in fostering a sense of commercial responsibility beyond that of the current consumer and current market, namely for the climate, social goals (e.g., EDI), and future generations.
Locating Competition Law
As a result of its significance as a commercial topic, competition law can often be difficult to locate and define. First, competition law is inescapably multi-jurisdictional, with broad similarities between jurisdictions (e.g., especially the EU and UK, even post-Brexit) but also notable variation in response to various political pressures, competition agencies, and the characteristics of specific national markets. The major competition jurisdictions include the EU, the US (antitrust enforcement), the UK, and China.
Second, competition law has a number of protagonists, with unique features compared to other areas of commercial awareness. While the prominence of the market, businesses, law firms, and directors is very familiar, there is a pertinent focus on consumers, or better phrased, ‘the consumer’ as a fictitious symbol of what consumers prefer or – often – what it is thought that consumers should prefer. Crucially, enforcement is overseen by specialist competition authorities, e.g., the CMA in the UK.
Third, competition law intersects with a large (and ever-growing) diversity of other bodies of law, with notable examples being criminal law (e.g., for assisting in cartel behaviours), contract law, intellectual property, sports law and regulation, and emerging laws for the regulation of ‘Big Tech’ companies, personal data, and AI.
Finally, competition law also draws a web that unites multiple areas of commercial awareness, including supply chains, transport, energy/natural resources, the Green Transition or Revolution (ESG), market economics, and geopolitics.
Key words: antitrust; consumer welfare; efficiencies; cartel; market definition; market power; market dominance; vertical/horizontal agreements; concerted practices; undertakings; state aid; abuse.
Key legislation: Competition Act 1988; Enterprise Act 2002; Enterprise and Regulatory Reform Act 2013; Digital Markets, Competition and Consumers Act (DMCCA) 2024.
Writer: Luca Povoas
Editor: Imran K Chaudhri
Sources
Alison Jones and Christopher Townley, ‘Competition Law’ in Catherine Barnard and Steve Peers (eds), European Union Law (4th edn, Oxford University Press 2023)
Ashurst – Overview of Competition Law
Chris Townley, ‘Inter-Generational Impacts in Competition Analysis: Remembering Those Not Yet Born’, European Competition Law, 580-590 (2001)
Freshfields – Navigating Antitrust
Inge Bernaerts, ‘Competition Policy in Support of the Green Deal’, European Commission (2021)
LexisNexis – ‘Competition Law General Principles’
Office of Fair Trading – ‘A Quick Guide to Competition and Consumer Protection Laws That Affect Your Business’
Pinsent Masons – ‘Competition Law: The Basics’
Practical Law – ‘Overview: UK Competition Law’
Anna Gerbrandy, ‘Solving a Sustainability Deficit in European Competition Law’, World Competition, 539-562 (2017)
