EU and UK competition policies have the following aims:
- To increase consumer choice
- To ensure effective price competition between firms
- To help ignite technological innovations
- To investigate anti competitive behaviour which can have a negative impact on consumers
In the UK competition policy looks at:
- Control of mergers and takeovers
- The issues of antitrust and cartel formation
- Market liberalisation State aid control
Office of Fair Trading
The office of fair trading (OFT) ensures that consumers are getting the right prices for products
This is to monitor anti-business practices and to ensure that consumers are protected.
M.M.C. & the Competition Commission
If the OFT has reasonable intelligence to find that a business is being anti-competitive (e.g. charging high prices or restricting consumer choices), the OFT will report those businesses to the Monopolies and Merger Competition (M.M.C) or the competition commission.
MMC investigate if businesses will create unfair competition by taking over companies.
Competition commission will investigate if businesses are acting unethically such as charging high prices.
Punishment
The OFT, MMC and the competition commission are likely to investigate businesses with a market share of over 25%.
If businesses are found guilty of anti-competitive behaviour they can be:
- Fined 25% of all profits being made.
- Or they have to give their market share to other businesses that were affected.
EU Competition Policy
EU competition policy looks at:
- Restrictive practices
- Abuse of dominant market power.
This legislation deals with anti competitive behaviour. The EU has the power to punish anti competitive behavior even if there is no formal agreement to act in an anti competitive manner.
Penalties include them taking 10% of the firms turnover. Some behaviours including market sharing and exclusive marketing can be exempt if they increase either consumer benefits or technical progress.
Costs & Benefits of Policies
Costs
- Administration costs in implementing the policy
- Can be expensive and time consuming to enforce
Benefits
- Protects consumers from unfair practices
- Encourages and enhances fair competition
Real World Examples
The takeover of Safeway by Morrisons was investigated to ensure that no unlawful practices occurred. Tesco has been investigated by the EU
