UK Competition Policy

Definition of Competition Policy: Government policies to prevent and reduce the abuse of monopoly power.

Abuse of monopoly power can lead to market failure and be against the public interest. Therefore Governments are concerned to intervene and protect the interests of the consumers.

1998 Competition Act sought to bring the UK into line with EU competition policy

The OFT is responsible for investigating suspected abuses of monopoly power and engaging in prohibited practices. There are two main types of behaviour they investigate:

Collusive Behaviour

This occurs when firms enter into agreements to fix prices and or output. This enables firms to make higher profits at the expense of consumers.

Collusive tendering. This occurs when firms enter into agreements to fix the bid at which they will tender for projects. Firms will take it in turns to get the contract and enable a much higher price for the contract.

Collusive behaviour is illegal and can be investigated by the OFT.

Abuse of Market Power

If a firm has more than 40% of market share, it is considered to have market power. The OFT is more likely to investigate firms with a dominant market position. Though they can also investigate people with less market share. Abuse of Market Power may include:

monopoly-diagram

Competition and Markets Authority

UK competition policy is regulation by CMA (Competition and Markets Authority). This used to be managed by the OFT and Competition Commission.

The CMA area of influence includes:

Examples of Competition Policy

The merger between HP foods and Heinz accepted by Competition Commission

The report “concluded that the acquisition may not be expected to result in a substantial lessening of competition within the markets for the supply of tomato ketchup, brown sauce, barbecue sauce, tinned baked beans and tinned pasta products in the UK.”(March 2006)

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