The Competition Act 1998 came into force in 2000. Under it, the Office of Fair Trading can impose large fines and declare void arrangements that are either agreements between undertakings whose object or effect is the distortion of competition (the Chapter I Prohibition) or are abuse of a dominant position (the Chapter II Prohibition). In the OFT’s first abuse of dominance case, in 2001 it fined Napp Pharmaceuticals £3.2m (later reduced to £2.2m on appeal) for doing two things. One was for having charged excessively low prices for its sustained release morphine tablets in the hospital sector, thereby keeping out competition through its predatory pricing. The other was for having charged excessively high prices in the community sector. It had faced little competition in the large and profitable community sector due to its actions in the hospital sector. The hospital sector was the gateway to realising community sector sales. Napp’s prices to the community sector had been 10 times higher than in the hospital sector. In that sector, it had had a gross margin of 80% until 10 years ago.
Now, the OFT has published a report evaluating the impact of its 2001 decision. It has concluded that, as a result of its intervention, the prices in the hospital sector have risen so that other people can compete, Napp’s market share has dropped significantly, and prices in the community sector have come down (and by far more than the OFT had required in its decision). This has therefore been a significant success for boosting fair competition.