If it weren't so dangerous, it would be amusing to watch the business community take dead aim at its own foot, and pull the trigger — so often that it cannot possibly have any toes left.

Hedge fund operators contrive to have their massive incomes treated as capital gains, and are taxed at a lower rate than their cleaning staff, and dare to defend that position before a parliamentary committee. Executives demolish shareholder value, but leave with multimillion-dollar bonuses, and the business community argues that this is the way that free markets set compensation. Britain finally gets a meaningful competition policy, thanks to the former Chancellor Gordon Brown, and a head of the Office of Fair Trading who means to enforce it, and the City and outlying boardrooms are up in arms.

Never mind that the ultimate justification of free-market capitalism is that it is indeed characterised by free markets. The vigorous competition of contesting suppliers for the custom of consumers produces a host of advantages. For one thing, competition creates what the great economist Joseph Schumpeter called “a perennial gale of creative destruction”, forcing companies to innovate. Old, obsolete products and inefficient production and distribution techniques simply cannot survive, and are blown away, to the benefit of consumers. And not only consumers, but to all participants in the economy whose welfare depends on continuous economic growth.

For another, competition forces companies to offer consumers not only the best prices that the cost of production permits, but the widest variety of price-quality combinations. High prices and high service, low prices and no frills, and multiple combinations in between. All are made available as firms try to find profitable niches in the market.

Perhaps most important, competition means that any newcomer with a great idea for a better mousetrap has a good chance of persuading some venture capitalist to back him, assuming his parents won't, and moving from idea to saleable product. That keeps society mobile, flexible, prevents incumbents from resting on their laurels.

Gordon Brown understood these benefits, at least when considering the private sector, and understood, too, that Britain's competition policy was too flaccid to be effective. Which is why some five years ago he pushed through legislation making it a criminal offence for businessmen to collude to fix prices or engage in other forms of cartel behaviour. He made it clear to enforcement authorities that they should prevent mergers that might result in a firm so dominant as to be able to stifle competition, and that they should not allow dominant firms to adopt pricing and other practices that unduly squeeze smaller competitors or bar potential rivals.

Enter John Fingleton, after a distinguished career as an antitrust enforcer in Ireland, to head the Office of Fair Trading and build on the work done by his brilliant predecessor, John Vickers, now safely back in Oxford, no longer a target of the animus of the business community. Among other things, Mr Fingleton decides to prosecute banks that he alleges pile non-transparent and unannounced charges on customers. So far, he is ahead on points in what promises to be a protracted legal battle.

As if that were not enough, he decides to investigate whether supermarkets are collusively setting prices for some products — classic cartel behaviour. I have no way of knowing whether the supermarkets are innocent or guilty, and agree with critics that the OFT should not have found Morrisons guilty-by-press release in a bout of what a High Court judge called sensationalist publicity, for which Mr Fingleton apologised and the OFT coughed up a £100,000 mea culpa.

But I do know that the steps the OFT has taken in what is the first serious, concerted assault on cartel behaviour in Britain are old news in most countries with a serious devotion to competition. One technique is to grant leniency to the first cartel member to come forward and, yes, rat on his confederates. Look at it this way. Cartels are formed to rob consumers of money by charging them more than a free-market price. That is no different from conspiring to burgle their homes. Surely no one would object if one of a gang of thieves planning to rob a house, or a bank, decided to go to the police and tell all in return for a reduced sentence, or none at all. So, with cartelists. If the promise of leniency increases the probability that the ring will be broken up, authorities in America, and now here, are right to make such an offer.

An even more important weapon against cartels is the so-called dawn raid. Enforcement officers show up, unannounced lest crucial evidence be destroyed, and seize any records that might reveal communications among competitors to set selling or buying prices, or otherwise to co-ordinate their activities to the disadvantage of consumers. Instead of cheering this effort to preserve the sort of markets on which the survival of capitalism in the end depends, howls of protest can be heard from boardrooms across the land. Many of these noises emanate from chief executives who have declined Mr Fingleton's offer to meet to discuss how he intends to enforce competition law. That chore is left to their lawyers, who are not known to weep when forced to bill clients millions of pounds to defend them in enforcement proceedings and, in recent years, to keep them out of jail.

Not everything the OFT does can be defended. Staff turnover often makes it necessary for companies under investigation to educate and re-educate young lawyers and economists in the intricacies of their industries, making cases drag on for too long, as I have learnt to my pain.

But businessmen who worry that public support for capitalism might be waning in the face of inequities in the distribution of its fruits, an economic slowdown, and the Government's intervention on behalf of troubled banks, should give at least two cheers for the OFT's efforts to keep prices at competitive levels, and preserve competitive opportunities for fledgeling entrepreneurs.

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