This Introduction covers the prohibitions of anticompetitive agreements and abuse of dominance. For merger regulation see here.
Anticompetitive agreements can be unlawful even if they have limited geographical reach and, crucially, some prohibited behaviour may seem like sensible business practice, and not obviously wrong. An innocent breach should not result in the law's most severe sanctions - being fined up to 10% of turnover, directors' disqualification and imprisonment - but it may lead to a lesser fine, contracts being held invalid, or being sued by those who think they have suffered as a result.
The prohibition is against:
- agreements between undertakings,
- decisions by associations of undertakings or
- concerted practices
- may affect trade, and
- have as their object or effect the prevention, restriction or distortion of competition unless they are exempt because of the benefit they confer on the public.
For the precise wording, see
- EU law: Article 101 on the Treaty on the Functioning of the European Union.
- UK law: Chapter 1, Sections 2(1) and 9 of the Competition Act 1998.
The EU and UK laws are almost identical save that, to infringe Article 101, the agreement must affect trade between EU member states. If it does not, it is only UK law which may be violated.
If the UK were to exit the EU in the forthcoming referendum, it would make little difference because Article 101 applies equally to non-EU companies conducting business in Europe.
Everything below applies equally to EU and UK law unless otherwise stated.
The "object or effect" …
It is only necessary to fulfil one of the two criteria of "object or effect". If the object of an agreement is anticompetitive, it is unlawful even if the object is not achieved. Also, it is possible to violate the law unwittingly, as agreements with the effect of harming competition can be unlawful even if the harm was not intended.
… of "prevention, restriction or distortion of competition"
This can range:
- from flagrantly abusive price fixing and bid rigging;
- via blinkered pursuit of one's own interests, such as a retailer insisting that its lease in a shopping centre includes terms preventing the centre from granting leases to competitors;
- to seemingly sensible agreements for the sake of efficiency, like two water cooler companies agreeing to cover different halves of town.
Undertakings should also be wary of sharing information with competitors if this could lead to an unspoken understanding.
Exceptions and exemption
There are various possibilities for exception or exemption:
Agreements of minor importance (de minimis agreements): Under the European Commission’s de minimis Notice, horizontal agreements between competitors are of minor importance if the parties' combined market share is under 10%, and agreements between non-competitors are of minor importance if each party has under a 15% share of its own market. This is European law, but the UK regulator is likely to have regard to it too when applying Chapter 1. 
De minimis agreements are exceptions to the rule, as they do not fall within Article 101. The exemptions below fall within it, but are rendered exempt by Article 101(3).
Block exemptions: There are various block exemptions which, again, are largely market share tests. Key ones are:
- The block exemption for vertical agreements between businesses in a distribution chain if each party has under a 30% market share at its level of the chain.
- The block exemption for horizontal R&D agreements if the parties' combined market share is under 25%, or horizontal specialisationagreements if it is under 20%.
Horizontal agreements merit special attention from the authorities as they are between parties who ought to be competing, but R&D agreements can promote innovation, and specialisation agreements - where one party stops production and purchases from the other instead - can promote efficiency.
The main block exemptions are European law, but s10 of the Competition Act gives them parallel effect in the UK.
Individual exemption: An agreement falling outside the block exemptions is not necessarily unlawful. It is just outside the safe harbour of certain lawfulness which block exemption confers. It may be lawful if it contributes to:
- improving production or distribution, or
- promoting technical or economic progress,
while allowing consumers a fair share of the resulting benefit. 
For example, in the case of the shopping centre, it may be permissible to grant exclusivity to attract an "anchor" tenant like a department store as it can be impossible to build a centre without the commitment of such a tenant and the existence of the centre benefits consumers.
Exemption only applies if the anticompetitive aspect of the agreement is necessary for the benefit. Anticompetitive provisions cannot piggyback an agreement which benefits consumers in some other way. Also the anticompetitive provision must be minimised. For example, perpetual exclusivity for an anchor tenant may not be allowed if a few years' exclusivity would be enough to attract one.
When the Commission publishes a block exemption, it publishes parallel guidance on how agreements falling outside it are to be assessed for individual exemption. The assessment is usually complex, which is why block exemptions exist for agreements which, for market share reasons, have comparatively little impact.
Some restrictions, like price fixing or bid rigging, are considered to have the object, not just the effect of harming competition. They are therefore always unlawful, even if they would otherwise qualify for exception or exemption under the market share tests.
The fact a restriction is hardcore does not necessarily mean its unlawfulness is obvious. A frequent hardcore infringement in vertical agreements is the restriction on "passive" selling. In distribution agreements it can be lawful for a supplier to prevent its distributors actively selling into each other's exclusive territories. However, any attempt to stop them passively selling to customers from other territories who approach them would be an unlawful hardcore infringement.
Any analysis of whether behaviour is unlawful under Chapter 1 or Article 101 must start with a definition of the market being analysed. To be a "market", there must be a measure of independence from adjacent markets in two regards:
- The product market: Different products might comprise a single market if a reasonable number of purchasers believe the products are interchangeable / acceptable alternatives to each other.
- The geographic market: Would-be competitors may not be in the same market if, because of their physical locations, they are not both reasonably accessible to the same customers.
Market definition is usually determined by the SSNIP test; i.e. within what product and geographic parameters would it be profitable for a hypothetical monopolist to impose a Small but Significant Non-transitory Increase in Price, usually of 5-10%? If it would not be profitable, because customers would migrate to other products or places, it indicates that the parameters are not an appropriate market definition.
For more details, see for example this guidance from the former UK regulator.
Enforcement and Leniency
Investigations of anticompetitive collusion can start because the suspicions of a regulator – the European Commission, the UK’s Competition & Markets Authority or a UK sectorial regulator like Ofcom, Ofgem or the FCA – are aroused by complaints, or their own observation of indicators such as high price or profit, or low quality, variety or innovation, especially as compared with similar markets.
More frequently, however, investigations start because the regulator is informed by one of the parties to the agreement in exchange for leniency. Applicants for leniency can get up to 100% exemption from fines; the idea being to sow the seeds of mistrust among cartel members.
The level of leniency depends mainly on what evidence is furnished, how soon the participant comes forward and how fully they cooperate. Second, third, etc. applicants may still get some (declining) leniency.
Once an investigation is commenced, regulators have formal investigatory powers, including:
- To request documentary information and interviews.
- To conduct "dawn raids" of a business's premises and even directors' homes, and take copies of documents.
If the regulator’s provisional view is that the conduct under investigation amounts to an infringement, it issues a Statement of Objections to each undertaking it considers responsible for the infringement. The addressees of the Statement have a right of reply before a final decision is issued.
For more information about CMA investigations procedure, see itsguidance.
ABUSE OF DOMINANCE
Abuse of dominance is prohibited by Chapter 2 of the Act and Article 102 of the Treaty, which again are almost verbatim of each other save that Article 102 is only violated if the abuse affects trade between EU member states. Both provisions specifically cite:
- imposing unfair prices;
- limiting production;
- applying dissimilar conditions to equivalent transactions; or
- making contracts subject to conditions which have no connection with the subject of the contract. 
Although not separately listed, refusal to supply may also be abusive.
Dominance need not amount to a monopoly. It can simply be an ability to act to an extent independently of one's competitors.
An unfair price can be too high, but it can also be too low if it is with a view to driving competitors out and then increasing the price again; so-called "predation".
Another example of abuse is "margin squeeze", where a vertically integrated company which is dominant in the upstream market charges its downstream competitors a price which does not permit them to make an economically viable margin.
There are no exemptions to abuse of dominance. Rather, behaviour with a sufficient public benefit would not be abusive. However, similar to the de minimis exception, s40 of the Competition Act provides that, if a business has a turnover of under £50m, conduct which might otherwise be considered abusive is presumed to have "minor significance", rendering the business immune from financial penalty for infringing Chapter 2 (but not Article 102). Such conduct may still be investigated and the immunity withdrawn, although not with retrospective effect vis-à-vis penalty.