Competition law

Introduction

From a general point of view, competition law aims to promote healthy competition, providing a level playing field for businesses. It seeks to curb practices that would undermine or restrict competition to the detriment of consumers.

In the UK the responsibility for enforcing competition law lies with the Competition and Markets Authority (CMA) – an independent authority. The CMA took over the functions of the now-obsolete Office of Fair Trading and Competition Commission. 

Competition law in relation to the NHS and suppliers generally refers to the Competition Act 1998.

Gov.uk website – CMA

Gov.uk website – Consumer protection and unfair contract terms guidance

Competition Act 1998

Key points

In summary, competition law bans:

  • Abuse of a dominant market position by companies.
  • Anti-competitive agreements between companies (ie, agreements to fix prices or carve up markets).
  • Mergers or takeovers which, if allowed, would result in a substantial lessening of competition.

The Competition Act provides a framework for identifying and dealing with restrictive business practices and abuse of a dominant market position in the UK. It prohibits colluding to limit output, fix prices, tender collectively and share markets or information.

It also prohibits predatory pricing, excessive prices, refusal to supply and price discrimination. These are all seen as abuse of a dominant position in order to maximise profit, gain competitive advantage or otherwise restrict competition.

As well as creating a framework, one of the main purposes of the Act was to harmonise the UK with EU competition policy.

Gov.uk website – Competition Act 1998

How to avoid breaking competition law

According to Competition and Markets Authority 2018 research, understanding of competition law is low, with the majority of UK businesses not understanding competition law well. This lack of knowledge, combined with the fact that over two-thirds of businesses regularly meet with rivals, means that understanding the law is crucial.

Look out for:

  • Attending a meeting where rivals agree prices – this is illegal.
  • Agreeing to split up and share customers with competitors – this is illegal.
  • Bid-rigging, where competing bidders secretly agree who will win a contract and submit fake bids – this is illegal.

Gov.uk website – UK businesses’ understanding of competition law

Consequences of breaking competition law

The consequences of breaking the law are serious, damaging businesses as well as individuals’ careers. 

  • Businesses can be fined up to 10% of their annual worldwide turnover.
  • Individuals can face personal fines.
  • Directors can be disqualified from acting as directors.
  • Ultimately, imprisonment.

Other competition law considerations

Although the Office of Fair Trading (OFT) is no longer the responsible organisation for this area, its quick guide on competition and consumer laws for business remains a useful guide.

OFT was responsible for protecting consumer interests throughout the UK, but its responsibilities passed to a number of different organisations when it closed in 2014.

The European Commission (EC) also provides a number of useful publications on competition policy.

Gov.uk website – Competition and consumer laws for business: OFT911

Gov.uk website – A quick guide to competition and consumer protection laws that affect your business

EC website – Publications

Procurement and public contracts regulations

Key points

  • EU public procurement rules govern the way in which public bodies purchase goods, services and works.
  • Regulations exist to guarantee equal access to and fair competition for public contracts within the EU market.
  • A directive on public procurement was approved by the EU in 2014. In turn, this was implemented in the UK through the Public Contracts Regulations 2015.

EU website – Directive 2014/24/EU of the European Parliament and of the Council

Gov.uk website – The Public Contracts Regulations 2015

Procurement Directive and Public Contracts Regulations

EU law, particularly the EU treaty and the Procurement Directive 2014/24/EU, currently underpin the broad terms under which public procurement and competitive tendering operate in the UK. This includes the requirement to openly and competitively tender certain contracts and rules prohibiting anti-competitive behaviour.

The EU 2014 Procurement Directive refines the minimum public procurement rules set out under EU law, which are designed to create a level playing field across Europe, ensuring equal access to, and competition for, eligible public contracts.

Procurement Directive and Public Contracts Regulations

The rules have been transposed into UK law as the Public Contracts Regulations 2015 by the UK, Northern Irish, Scottish and Welsh governments. They establish how public authorities and certain public utility operators, including health and social care commissioners, purchase goods, works and services.

These regulations include the requirement for commissioners to advertise contracts valued above certain specific thresholds, in the OJEU (Official Journal of the European Union).

“Light touch” regime

The earlier Procurement Directive of 2004 made a distinction between the procurement of what were known in the UK as:

  • Part A services (subject to the full advertising and procedural requirements) and;
  • Part B services, which included health services and were subject to less onerous rules.

The 2014 Directive removed the distinction between Part A and Part B services entirely. Since April 2016 contracting authorities need to advertise all invitations to tender for health services contracts above specified thresholds in the OJEU. There is scope to apply lighter touch rules for some health services, such as restricting competition for these contracts to mutuals or social enterprises.

“Light touch” regime

Considering the limited cross-border interest for contracts for clinical services a “light touch” regime (LTR) was maintained. This is based on a higher threshold, set at 750,000 Euros. Health service contracts below this value are considered to have no cross-border interest and as such are not covered by the Directive.

For health service contracts of a value equal to or above 750,000 Euros, the following is required:

  • Advertisement in the OJEU (using contract notices or prior information notices) as well as publication of ex-post award notices.
  • Compliance with national rules ensuring that the key EU principles of anti-discrimination and equality are respected.
  • Award criteria can be based on principles other than price. In particular, quality, continuity, accessibility, comprehensiveness of services and innovation can be considered.

“Light touch” regime

Under LTR, commissioners have the freedom to determine the procurement procedure to use when awarding a contract, provided that they satisfy the principle of transparency and equal treatment of providers.

Commissioners may use certain award criteria that are relevant to patient care when designing and running their procurement processes, including the needs of vulnerable users and ensuring the quality, comprehensiveness and continuity of patient services. 

Health, social and other specific services are subject to the LTR where the value of the contract is in excess of 750,000 Euros.

Gov.uk website – Guidance on the new light touch regime for health, social, education and certain other service contracts

Market consultation and more access to negotiation

The laws broaden the possibilities for negotiation with bidders, while putting in place safeguards needed to protect against abuse.

The rules clarify the conduct of market consultation prior to the launch of a procurement process to assess the structure, capability and capacity of the market.

Procurement of innovation

The legislation introduces a procurement procedure called innovation partnership. This procedure allows NHS bodies to launch a single procurement process to cover both the R&D phase and the purchase of any resultant successful innovation.

Innovation partnership is structured in successive phases, setting intermediate targets to be attained by partners and providing the possibility to halt the process in case targets are not met.

Gov.uk website – Innovation partnerships

NHS (Procurement, Patient Choice and Competition) Regulations 2013

Key point

  • Existing domestic legislation, such as the Health and Social Care Act 2012 and the NHS (Procurement, Patient Choice and Competition) Regulations 2013 in England, currently enshrine the same rules as EU law.

In addition to the 2014 Directive and PCR 2015, commissioners of NHS services must also comply with the NHS (Procurement, Patient Choice and Competition) Regulations 2013. These were made under Section 75 of the Health and Social Care Act 2012.

The regulations set out a number of objectives for commissioners when procuring services, but in the main these include:

  • Securing the needs of patients.
  • Improving the quality and efficiency of services.

 

NHS (Procurement, Patient Choice and Competition) Regulations 2013

They also set out a number of principles that commissioners must respect when they procure services, mirroring general EU and UK procurement law, including transparency, proportionality and non-discrimination.

These laws, for example, prohibit NHS England or clinical commissioning groups from favouring a single provider and give powers to the regulator Monitor (and its successor, NHS Improvement) to enforce competition rules on NHS trusts.

Gov.uk website – The National Health Service (Procurement, Patient Choice and Competition) (No. 2) Regulations 2013

UK variations

EU law establishes rules that ban co-operation between providers and commissioners of services which might limit competition. This is especially significant in the English NHS, where the purchaser-provider split is in force and competition is encouraged.

Such rules do not apply in Wales and Scotland where both governments have imposed significant limits on the role of the market in their respective health services. Furthermore, neither country’s health system has a purchaser-provider split.

UK variations

Northern Ireland has also restricted competition within its health service, which tends to emphasise co-operation between HSCNI (Health and Social Care Northern Ireland) providers.

As health is a devolved matter and each nation has a different approach to competition within their respective healthcare system, this issue is of varying importance across the UK.

Impact of Brexit

The EU Withdrawal Act will convert existing EU law into domestic law, seeking to ensure legal continuity once exit day arrives. Several EU Directives that relate to competition and procurement have already been incorporated into UK law.

Brexit will therefore have little immediate effect and the current competition and procurement rules will remain in place for the foreseeable future.

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