Anti-competitive agreements in the UK: legal framework

In the UK, anti-competitive agreements are regulated by primarily by the Competition Act 1998 and more broadly though market studies and, market investigations under the Enterprise Act 2002.

What are anti-competitive agreements?

Chapter I of Competition Act 1998 prohibits agreements between companies which have as their object or effect the prevention, restriction, or distortion of competition within the UK

The definition of agreements is widely drawn and can include arrangements, either formal or informal, verbal or written, or concerted business practices between companies

Examples of the types of behaviours that could be contained within anti-competitive agreements may include:

• Directly or indirectly fixing the price for either the sale or purchase of goods or services or any other trading conditions
• Imposing restrictions on passive selling or internet sales
• Sharing markets, customers or sources of supply
• Exclusive supply or distribution agreements
• Controls or limit of markets, technical development, production, or investment.

Exemptions to anti-competitive agreements

In certain circumstances agreements although contrary to the Chapter I prohibition can be granted an individual exemption. An agreement will merit an individual exemption where the beneficial effects of the anti-competitive activity or agreement outweigh the anti-competitive effects. For instance, where the agreement contributes to improving the production or distribution of goods or promotes technical or economic progress while allowing consumers a fair share of the benefits.

Agreements between companies in the same corporate group will also be exempt.

Additionally, restrictions in certain common types of commercial agreements are exempted from the Chapter I prohibition under safe harbour legislation called block exemptions. These exempt all restrictions in the agreements covered provided they comply with the requirements of the legislation and do not contain serious restrictions of competition such as resale price maintenance. For example, there is a specific block exemption which covers vertical agreements. These are agreements which involve businesses at different levels of the supply chain

Consequence of an anti-competitive clause within an agreement

It is key to note is that even a single anti-competitive restriction within an agreement could make the whole agreement automatically void and unenforceable. This is why it is crucial to ensure that your agreement does not contain any anti-competitive provisions or operate to such effect.

Furthermore, a business involved in anti-competitive practices could end up facing severe fines from the Competition and Markets Authority (“CMA”) or possible actions for damages in the Courts from consumers, customers and competitors. It is also possible to face possible criminal sanctions if the agreements is a price fixing or market sharing agreement between competitors. Overall there is also the prospect that breaching competition legislation could significant damage a business’s public reputation .

Recent case example: CMA veterinary sector market investigation

The Enterprise Act 2002 allows the CMA to start investigations into markets which in which competition is not working properly and which is disadvantaging consumers. This is separate to the Competition Act 1998 which focuses on the individual conduct of specific companies rather than markets as a whole.

A notable example of the CMA’s active role in policing markets was in 2023, when the CMA launched an initial review into the UK’s veterinary sector, following concerns about limited competition and transparency in the industry. The investigation focused on veterinary services for household pets, examining issues such as the lack of pricing information for basic services and the consolidation of veterinary practices by large corporate groups.

The key concerns which the CMA flagged included:

• Insufficient pricing transparency – with over 80% of vet practices not displaying prices online
• Market consolidation – whereby around 1,500 out of 5,000 practices had been acquired by six large companies since 2013, potentially reducing consumer choice
• Overpricing of medicines and prescriptions
• Use of outdated regulatory frameworks which were no longer fit for purpose.

The regulatory body was investigating whether those factors listed above were limiting competition and harming consumers by driving up costs. Following the conclusion of the initial consultation and having considered the responses to it, the CMA determined the results of it enough to warrant the launch of a formal market investigation in May 2024, which focuses on the provisional analysis of the issues within the sector that were addressed.