Recent Antitrust Developments in the United Kingdom
| DOI | 10.1177/0003603X7502000205 |
| Date | 01 June 1975 |
| Published date | 01 June 1975 |
| Author | J. D. Gribbin |
| Subject Matter | Article |
RECENT ANTITRUST DEVELOPMENTS IN
THE UNITED
KINGDOM
by
J. D.
GRIBBIN·
INTRODUCTION
1.
The
Fair
Trading
Act
which
passed
through
Parlia-
ment in
July
1973
was
the
sixth in
the
UK
to be concerned
with
"antitrust"
as a special body of
law
having
distinctive
institutions designed to implement it. Like
three
of
its
prede-
cessors
(the
Acts of 1948, 1956
and
1965)
it
made
major
legis-
lative
and
institutional
changes, which
this
paper
will de-
scribe;
but
before doing so
it
will give a
brief
introduction
to
the
previous
history
of competition policies.
2.
Before
1948
there
had
been in
the
UK
no equivalent to
the complex of laws which
form
what
is known in
the
United
States
as
antitrust.
So
far
as
there
were
similar
checks on
business behavior, these
arose
from
the
common
law;
and
while
the
doctrines of monopoly, conspiracy
and
contracts in
restraint
of
trade
had
considerable
potential
for
beneficial
application, the reluctance of English
judges
to
interpret
them
with aconcept of
the
public
interest
wider
than
the relation-
ship between the
interested
parties
had
meant
that
there
were
no significant legal obstacles to the emergence of
cartels
and
dominant
market
positions. The
relative
absence of legal
restraint
was generally in accord
with
prevailing
opinion,
particularly
in
the
late
1920's
and
the
1930's when
many
cartels
and
"combinations" arose as aresponse to
the
de-
pressed
economic conditions of those times.
The
formation
of
cartels
was often
assisted
by the Government,
there
being
tax
incentives
for
rationalization schemes,
and
the movement
was developed
further
as a means of
regulating
production
•Senior Economic Adviser of the United Kingdom
Office
of
Fair
Trading.
377
378
THE
ANTITRUST
BULLETIN
and consumption
during
the 1939-45 war, when firms
and
industries
not
previously cartelised were
brought
by the Gov-
ernment into associations
that
allocated scarce materials
and
fixed prices.
During
the
latter
part
of
the
war, however,
when thoughts
turned
to reconstruction,
it
was accepted
that
widespread
private
organization of
industry
through
cartels
could seriously impede the
major
structural
changes made
necessary by the
very
different post-war economic environ-
ment. This view found expression in the Monopolies
and
Restrictive Practices Act, 1948, which established the Monop-
olies and Restrictive Practices Commission to consider
"refer-
ences" made to them by the
Board
of
Trade
and
to make
judgments as to whether the practices or
structures
of the
industries examined were
against
the public interest. Indus-
trial
references could be made either where one firm supplied
one-third or more of the
market
or where two or more firms,
together supplying one-third or more of the market, prevented
or restricted competition by
their
joint actions. The public
interest was defined as the desirability of
attaining
efficiency
in production
and
resource allocation, technical progressive-
ness,
and
the encouragement of new
entry
into markets
and
the stimulation of exports. Between 1948
and
1956
the
Monop-
olies Commission investigated 20 industries, 18 of them hav-
ing cartels which controlled between 50
and
100 percent of
output. These investigations
and
the resulting findings
formed the basis for subsequent policy developments.
THE
FIRST
EXPERIMENTS
3.
Initially
this first period was one of tentative investi-
gation
and
experimentation,
and
not all
cartel
arrangements
were judged to be against the public interest. A
major
collec-
tive practice was the determination of common minimum sell-
ing prices;
and
though in most cases these were condemned the
Commission found some relatively exceptional circumstances
in which
the
practice was permissible;
for
example, where
considerable technical cooperation between the firms resulted
in ahigh level of efficiency
and
quality,
and
where there was
ANTITRUST
DEVELOPMENTS
IN
THE
UNITED
KINGDOM
379
an
external
check on prices from a
strong
and
knowledgeable
buyer. However,
most
common price systems were condemned
because
they
were shown to impose
an
excessive degree of
rigidity
that
kept
high-cost
producers
in existence,
prevented
the
rapid
emergence of new products
and
processes,
and
often
resulted
in prices
and
profits
higher
than
they
would
have
been
if
the
most efficient
had
been
permitted
to compete in
price.
Virtually
all
other
collective
arrangements,
such as
sales quotas, the maintenance of resale prices, exclusive deal-
ing,
loyalty
rebates, collective boycotts,
and
collusive tender-
ing, were condemned. Since these practices were widespread,
as became
apparent
from
successive investigations, aspecial
enquiry
into them was conducted by the Monopolies Commis-
sion.
This
report
"Collective Discrimination," in combination
with
the cumulative effect on public opinion of the previous
findings about the
adverse
economic consequences of restric-
tions of competition,
led
to the
next
major
development-the
Restrictive
Trade
Practices
Act
of 1956.
THE
1956
ACT
4.
This
Act
made
four
major
changes:
First,
it
so de-
fined a class of business practices, agreements among competi-
tors,
that
they
became issues which could be
judged
in a
court
of law. Second, in
contrast
to
the
1948
Act
it
no
longer
took
a
neutral
position
about
collective restrictions. These were
to be considered
against
the
public
interest
unless
the
defen-
dants
were able to
plead
successfully one
or
more of
the
nar-
rowly defined beneficial
"gateways"
allowed in justification.
Third,
it
set
up the novel Restrictive
Practices
Court, consist-
ing
of
judges
and
lay
assessors, to decide cases.
Finally,
it
established the
Office
of
the
Registrar
of Restrictive
Trading
Agreements, with afull-time
staff
which
had
exclusive re-
sponsibility
for
registering
all agreements subject to
the
Act
and
either
taking
them
to
court
for
judgment
or
having
them
certified to be of
minor
or
no economic significance
under
provisions which
permitted
this. These
were
significant al-
terations
both in acceptance of
antitrust
as
an
instrument
of
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