The Competition Act 1998 is the UK’s main law against anti-competitive behaviour. It bans two things: agreements between businesses that restrict competition, and the abuse of a dominant market position. Breaking either prohibition can cost a company up to 10 per cent of its worldwide turnover, and individuals who take part in cartels face up to five years in prison, unlimited fines, and disqualification from being a director for up to 15 years.1Legislation.gov.uk. Competition Act 1998 – Section 362Legislation.gov.uk. Enterprise Act 2002 – Section 190 Enforcement sits with the Competition and Markets Authority (CMA), which has powers to raid offices, seize devices, and prosecute.
Chapter I: Agreements That Restrict Competition
The Chapter I prohibition covers any agreement between independent businesses that prevents, restricts, or distorts competition in the UK. Written contracts, verbal deals, and coordinated conduct through a trade association all count. What matters is the effect on the market, not the paperwork.3Legislation.gov.uk. Competition Act 1998 – Section 2
Agreements between direct competitors draw the sharpest response. Price-fixing, market-sharing, output limits, and bid-rigging are treated as harmful by their nature, so the CMA does not have to prove they actually pushed prices up. Bid-rigging, where competitors secretly agree who wins a tender and at what price, strips genuine competition out of procurement entirely.
Agreements between businesses at different levels of the supply chain, such as a manufacturer and a retailer, can also breach Chapter I, though most are lawful. The clearest line is resale price maintenance: a supplier dictating the minimum price a retailer can charge. Recommended prices are fine. Mandatory minimums are not.
Any agreement caught by Chapter I is automatically void. A court will not enforce its terms, so a business that has built a commercial relationship around an illegal clause has no way to hold the other side to it.
Chapter II: Abuse of a Dominant Position
The Chapter II prohibition targets one business acting on its own where it holds enough market power to behave independently of competitors and customers.4Legislation.gov.uk. Competition Act 1998 – Section 18 There is no fixed threshold, but the CMA treats dominance as unlikely below 40 per cent market share and presumed above 50 per cent, adjusted for competitor strength and barriers to entry.5GOV.UK. Competition Law – Abuse of a Dominant Position
Being dominant is not itself unlawful. Winning on efficiency, product quality, or price is fine. The prohibition bites only when the dominant firm exploits its position in ways an equally efficient competitor could not replicate. Typical abuses include:
- Predatory pricing, where prices are set below cost to drive rivals out, then raised once they have gone.
- Excessive pricing, where the price bears no reasonable relation to the economic value delivered.
- Refusal to supply long-standing customers without justification, particularly where they depend on the product to compete.
- Tying and bundling, forcing buyers to take an unrelated product to get the one they actually need.
When a Restrictive Agreement Is Still Allowed
Not every agreement that restricts competition is unlawful. Section 9 of the Act exempts agreements that deliver genuine benefits, but all four conditions have to be satisfied together: the agreement improves production, distribution, or technical or economic progress; consumers get a fair share of those gains; the restrictions go no further than needed; and competition is not eliminated for a substantial part of the affected products.6Legislation.gov.uk. Competition Act 1998 – Section 9 The business claiming the exemption has to prove all four. In practice, that is a heavy evidential lift.
Most businesses rely instead on block exemptions, which give automatic cover to whole categories of agreement. The main one is the Vertical Agreements Block Exemption Order (VABEO), covering supply and distribution deals where neither party holds more than 30 per cent market share in the relevant market.7Legislation.gov.uk. Competition Act 1998 (Vertical Agreements Block Exemption) Order 2022 Even inside the VABEO, resale price maintenance is still off-limits.
Smaller businesses get limited protection from fines. Under Section 39, parties to a “small agreement” are immune from Chapter I penalties, though price-fixing is always excluded.8Legislation.gov.uk. Competition Act 1998 – Section 39 For Chapter II, businesses with turnover under £50 million benefit from the “conduct of minor significance” immunity.9Legislation.gov.uk. Competition Act 1998 (Small Agreements and Conduct of Minor Significance) Regulations 2000 These shield small firms from fines, but not from investigation or directions to change behaviour. The conduct is still an infringement.
Penalties and Personal Liability
The CMA can fine any business that has infringed Chapter I or Chapter II intentionally or negligently, up to 10 per cent of worldwide turnover.1Legislation.gov.uk. Competition Act 1998 – Section 36 The calculation starts from turnover in the affected market, is stretched by the duration of the infringement, and adjusts up for aggravating factors like repeat offending or ringleader status, and down for cooperation.
Corporate fines are only half the picture. The Enterprise Act 2002 created a separate criminal offence for individuals who agree with others to fix prices, limit supply or production, share out markets or customers, or rig bids between at least two businesses.10Legislation.gov.uk. Enterprise Act 2002 – Section 188 The maximum sentence is five years in prison, an unlimited fine, or both.2Legislation.gov.uk. Enterprise Act 2002 – Section 190
A director involved in a competition breach can also be disqualified for up to 15 years.11Competition and Markets Authority. Director Disqualification Orders in Competition Cases During that period, acting as a director, managing a company, or serving as an insolvency practitioner is itself a further criminal offence. These personal consequences are designed to reach the people who actually make cartel decisions, not just the corporate entity that pays the fine.
How the CMA Investigates
The CMA can open a formal investigation whenever it has reasonable grounds to suspect an infringement of Chapter I or Chapter II.12Legislation.gov.uk. Competition Act 1998 – Section 25 That is a low threshold, and it applies to past conduct even if the arrangement has already ended.
Its sharpest tool is the unannounced inspection, the “dawn raid.” Officers can enter business premises, search paper and electronic records, seize hardware, and take forensic copies of data on servers and personal devices.13GOV.UK. Guidance on the CMA’s Investigation Procedures in Competition Act 1998 Cases They can also issue formal notices requiring documents and compel individuals to attend recorded interviews. Obstruction or misleading answers are separate offences.
Where ongoing conduct is causing serious harm, the CMA can impose interim measures: temporary directions that take effect before the investigation is complete.14Legislation.gov.uk. Competition Act 1998 – Section 35 These are rare, but they exist.
Leniency for the First to Confess
The CMA’s leniency programme gives the first business to report a cartel guaranteed immunity from financial penalties, director disqualification, and criminal prosecution, provided it comes forward before the CMA opens its own investigation.15Competition and Markets Authority. Cartels: Being First to Apply for Leniency Matters More Than Ever Businesses that come forward after an investigation has begun can no longer get upfront immunity. Being first matters.
Individuals can also blow the whistle separately from any corporate leniency application. The CMA can pay rewards of up to £250,000 for information significant enough to lead to enforcement action.16GOV.UK. Blowing the Whistle on Cartels Rewards are discretionary, and central participants in the cartel generally do not qualify, though someone whose role was peripheral, such as an employee occasionally sent to cartel meetings without a decision-making part, may still be eligible.
Private Damages Claims
Businesses and consumers who lose money because of anti-competitive conduct can sue for compensation. Follow-on claims rely on an existing CMA or European Commission infringement decision as proof of the breach, leaving only the amount of damage to argue about. Stand-alone claims require the claimant to prove both the illegal conduct and the loss, usually with detailed economic evidence.
Most cases go to the Competition Appeal Tribunal, alongside the High Court in England and Wales and the Court of Session in Scotland.17GOV.UK. Quick Guide to Private Litigation in Competition Cases The Tribunal also runs collective proceedings, where one representative brings a claim on behalf of a whole class of affected buyers.
The limitation period is six years in England, Wales, and Northern Ireland, and five years in Scotland. Time does not start running until the later of the day the infringement ends or the day the claimant knows, or should know, about the conduct, its illegality, the loss suffered, and who caused it. A live CMA investigation, a consensual dispute resolution process, or collective proceedings pause the clock.18Legislation.gov.uk. Competition Act 1998 – Schedule 8A
Appealing a CMA Decision
A business found to have infringed Chapter I or Chapter II can appeal to the Competition Appeal Tribunal, challenging the infringement finding, the penalty, or both. The Tribunal reviews questions of law and fact. The deadline is two months from the date the CMA notifies or publishes its decision, and extensions are granted only in exceptional circumstances. That window closes quickly, so businesses expecting an adverse decision should have their appeal strategy ready before it lands.