Major reforms of competition law are contained in a document, General Scheme of the Competition Bill 2001, circulated by the Department of Enterprise, Trade and Employment last week.

Penalties for engaging in cartels would be significantly increased, with provision for jail sentences of up to five years, while greater powers would be given to the Competition Authority to investigate such behaviour.

Responsibility for deciding on mergers would be transferred from the minister to the Authority, while the Authority would also be given powers to highlight statutory restrictions on competition. There is a striking similarity between the proposals and those included in the British Department of Trade and Industry's White Paper on competition law, which was also published last week.

It is proposed to repeal the existing competition and mergers legislation.

The prohibitions on anti-competitive agreements between firms and the abuse of market power by firms in a dominant position introduced in 1991 would be retained. However, a clear distinction would be drawn between practices such as price-fixing, market sharing and bid-rigging on tenders, which might be described as "hard-core" cartel practices, and other types of behaviour.

The maximum penalty for managers and directors of firms convicted of engaging in "hard-core" cartels would be increased from two to five years, while the existing maximum jail sentence of two years for non-cartel offences would be abolished.

The level of fines for firms engaging in cartels and all other types of anti-competitive behaviour remain unchanged at £3 million (€3.8 million) or 10 per cent of turnover, whichever is greater.

It makes sense to distinguish between cartel behaviour and other practices.

Exclusive distribution agreements may, in some circumstances, be anti-competitive and in others simply increase efficiency. There is frequently a fine line between aggressive competition and abuse of dominance.

Cartels on the other hand are anti-competitive by definition. They involve rival businesses secretly agreeing to charge higher prices to their customers and are a conspiracy to defraud consumers. Those responsible are sophisticated business executives who have risen to senior management positions in their companies and are generally far wealthier than the individual consumers who are cheated by such activities.

Increasing the penalty for engaging in cartels to five years would allow Garda∅ to arrest and detain suspects for questioning for up to six hours with the possibility of a further six hour extension under the 1984 Criminal Justice Act. The absence of powers to question individuals has been a major stumbling block in cartel investigations up to now.

It is also proposed to introduce a number of other provisions:

Cartels would be presumed to be anti-competitive, thus eliminating the need to prove this point;

Defendants could not rely on the defence contained in the 1996 Act of not knowing that what they were doing was anti-competitive;

In addition to powers to search business premises, it is proposed that authorised officers could obtain warrants to search the homes of company directors, managers and other employees;

It is proposed to introduce various presumptions regarding documentary evidence.

It is proposed to exempt certain anti-competitive agreements from penalties. To qualify, an agreement must increase efficiency, bring benefits to consumers and satisfy certain other conditions.

Cartels are not efficiency enhancing and do not benefit consumers yet the proposals as they stand would permit defendants in cartel cases to argue that they satisfy the requirements for exemption. Undoubtedly this would greatly complicate such cases and make successful prosecutions far more difficult.

It would be far better to include a rebuttable presumption that cartels do not satisfy the conditions for exemption.

The other main weakness in the proposals relates to searches. The "best evidence" rule tends to require originals rather than copies of documents. However, as at present, it is proposed that investigators conducting a search would only be permitted to take copies of documents.

Investigators should be able to take original documents in searches, subject to a provision that copies of all such documents must be furnished to the company within a relatively short period of time, say five working days, as they may need them for their business.

There is no power to use reasonable force to gain entry in the face of obstruction as exists for most criminal search powers.

It is proposed that responsibility for deciding on mergers would be transferred from the minister to the Competition Authority.

The Authority would have to publish details of all mergers notified to it and allow interested parties to comment, while it would have the power to block mergers that substantially lessen competition.

The minister would retain certain powers in respect of media mergers.

The proposed reforms address many of the shortcomings in existing legislation. In light of the business scandals of recent years, it is undoubtedly time that serious measures to deal with white collar crimes such as cartels were introduced.