Competitition Policy
Competition policy covers the various ways in which the competition authorities of national governments, as well as the EU seeks to make markets work better and achieve a higher level of economic efficiency and economic welfare.
The Main Aims of Competition Policy
The goal of competition policy and encourage competition, and make markets work better and contribute to increased efficiency and competitiveness of the UK economy within the EU market and a single. Competition policy aims to ensure that:
v Consumers a wider choice in the markets of goods and services.
v And technological innovation that enhances dynamic efficiency gains.
v Effective price competition between suppliers.
v Investigate allegations of anti-competitive behavior in markets that may have a negative impact on consumer welfare.
There are four pillars of competition policy in the United Kingdom and the European Union:
There are four pillars of competition policy in the United Kingdom and the European Union:
Antitrust & cartels:
This involves the elimination of agreements that seek to restrict competition (eg price-fixing agreements, or gangs), and violationscommitted by companies holding a dominant position in the market.
Market liberalisation:
Editing includes the introduction of new competition in previouslymonopolistic sectors such as power supplies, telecommunications, air transport and postal services with the new arrangements to retailers for cars within the single market.
State aid control:
Competition policy analyses examples of state aid measures by Member State governments to ensure that such measures do not artificially distort competition in the Single Market (e.g. the prohibition of a state grant designed to keep a loss-making firm in business even though it has no prospect of long-term recovery).
Merger control:
This involves the investigation of mergers and take paymentsbetween companies (such as a merger between two large groupsthat would lead them to dominate the market).
Anti-Trust Policy - Abuses of a Dominant Market Position
The company holds a dominant position if its economic power enables it to work inside the market without taking into account the reaction of its competitors or consumers, and intermediate or final.
In assessing the strength of the company's economic market, the EU Commission is the market share and other factors such as whether there are competitors credibility, whether a company, ownership and control of the distribution network of its own, and whether he has a right of access environment for raw materials. We note here that the market share is not the sole determinant of economic power in the industry
Held a dominant position is not wrong in itself, if it is the result of the effectiveness of the company's own ability to compete against other companies. But if the company is using this power to stifle competition, and this practice is considered anti-competitive.
A recent example of that investigation and the long legal battle by the EU Commission in the alleged assault of the forces of the market by Microsoft. He accused Microsoft of continuing to abuse its monopoly in the software market. Claimed to investigators that Microsoft bundled with Windows Media Player, and damage to programs, unfair competition, such as RealPlayer networks, Real Madrid, "QuickTime and Apple Computer. The investigation continued and the outside is now more than eight years. In March 2004 the EU imposed a fine Microsoft € 497m March 2004 for alleged abuse of its dominant position in the driver and the server software market. in July 2006, and business Guardian Unlimited | The European Union fined Microsoft € 280mfurther a fine of $ 194m £ |.
In assessing the strength of the company's economic market, the EU Commission is the market share and other factors such as whether there are competitors credibility, whether a company, ownership and control of the distribution network of its own, and whether he has a right of access environment for raw materials. We note here that the market share is not the sole determinant of economic power in the industry
Held a dominant position is not wrong in itself, if it is the result of the effectiveness of the company's own ability to compete against other companies. But if the company is using this power to stifle competition, and this practice is considered anti-competitive.
A recent example of that investigation and the long legal battle by the EU Commission in the alleged assault of the forces of the market by Microsoft. He accused Microsoft of continuing to abuse its monopoly in the software market. Claimed to investigators that Microsoft bundled with Windows Media Player, and damage to programs, unfair competition, such as RealPlayer networks, Real Madrid, "QuickTime and Apple Computer. The investigation continued and the outside is now more than eight years. In March 2004 the EU imposed a fine Microsoft € 497m March 2004 for alleged abuse of its dominant position in the driver and the server software market. in July 2006, and business Guardian Unlimited | The European Union fined Microsoft € 280mfurther a fine of $ 194m £ |.
Anti-Competitive Practices:
Is defined as the best anti-competitive practices and strategiesdeliberately designed to reduce the degree of competition within the market. Can be taken such actions by a single company in isolationor a number of companies operating in the active or passivecomplicity. Since 1998 there have been many investigations in industries such as chemicals, banking, pharmaceuticals, airlines, beer, paper, plasterboard and preservatives, and computer games!
Examples of anti-competitive practices
vPredatory pricing funded through mutual support (and not all forms of price discrimination, anti-competitive though - much of it is just a real attempt to remain competitive in the market). Was an example of a claim of predatory pricing in 2005 when the accused Wal-Mart to use this strategy because they attempted to storm the German food market for retail sale. Wal-Mart is facing accusations that it was used on short-term predatory pricing for the development of small shop owners of the business. In July 2006, announced that Wal-Mart and had to withdraw from Germany, where it sold its stores to other work.
vCreation of artificial barriers to entry:
Through advertising and marketing and brand proliferation which increase the costs of a new firm successfully entering a market
Price Fixing – The Office of Fair Trading
Competition law in the United Kingdom expressly prohibits the now almost any attempt to fix prices - for example, you can:
v Consistent with the prices of competitors, for example, you can not agree on a work list of the least price for the post
v Stock markets or limit production to raise prices
v The imposition of minimum prices at different stores, such as distributors
v Agree with your competitors what purchase price will offer your suppliers
v Cut prices below cost in order to force smaller or weaker competitor from the market
v The law does not only include formal agreements. It also includes other activities have an impact on price-fixing. For example, you should not discuss pricing plans with your competitors. If you then all "happen" to raise your prices, and you determine the price.
Cartels and the law in the UK
Cartels are a form particularly damaging to the anti-competitive behavior - to take action against them is one of the OFT's priorities. Under the Competition Act 1998 and Article 81 of the EU Treaty, cartels are prohibited. And can be fined any work found to be a member of the organization up to 10 per cent of its turnover in all parts of the world. In addition, the Corporation Act 2002 makes it a criminal offense for dishonest individuals to take part in the most serious types of cartels. Any person convicted of a crime to obtain the maximum prison sentence of five years and / or an unlimited fine.
There have been many examples of the allegations and investigations into price-fixing and other forms of collusion in the UK and European markets in recent years. They provide all the evidence of how the attention of competition authorities in both the UK and the European Union in promoting the use of their powers under the laws of the new competition to investigate possible cases of price fixing or anti-competitive behavior.
There have been many examples of the allegations and investigations into price-fixing and other forms of collusion in the UK and European markets in recent years. They provide all the evidence of how the attention of competition authorities in both the UK and the European Union in promoting the use of their powers under the laws of the new competition to investigate possible cases of price fixing or anti-competitive behavior.
House of Fraser and Oakley – price fixing for sunglasses
Board of Directors of Fraser store group is facing accusations that it colluded with Oakley to fix the price sunglasses, which sell for between 50 £ and £ 200 a pair. After investigating for two years, has been published by the Office of Fair Trading (OFT) an interim report claiming that both the House of Fraser and Oakley had violated the Competition Act in 2002. Both companies now have the opportunity to make submissions to the OFT in the defense of their position.
It is believed that the OFT between November 2001 and March 2004, provided the Oakley House of Fraser with sunglasses on the condition that the store sold in less than the minimum Oakley suggested selling price. Has instigated the investigation after complaints from rival retailers and complaints from some customers. Results, if confirmed, OFT has the power to fine companies up to ten per cent of its turnover.
It is believed that the OFT between November 2001 and March 2004, provided the Oakley House of Fraser with sunglasses on the condition that the store sold in less than the minimum Oakley suggested selling price. Has instigated the investigation after complaints from rival retailers and complaints from some customers. Results, if confirmed, OFT has the power to fine companies up to ten per cent of its turnover.
Dual pricing – Sony versus the internet retailers
UK Office of Fair Trading is investigating allegations of possibleprice discrimination illegal on the part of Sony's global electronics giant. Some complain that online retailers that Sony is the discrimination against them by providing the lowest (low) retail prices for the establishment of the high street, making online retailers to pay more of their supplies from many of the best-sellingSony products.
According to the complaint from the Interactive Media in RetailGroup (IMRG) and was their claim that the work of dual pricing as astrategic anti-competitive harm consumer interests. Dual pricing is the mechanism of the recently introduced electronic consumer goods manufacturers whereby traders to pay more for goods ifsold on the Internet.
IMRG claimed that there is no economic justification for dual pricing and the defense that it costs more to run the "brick andmortar" retail trade compared with the online business bothirrelevant and open to dispute. In a press release they claim that
Sony has been in the newspapers as one of the manufacturers thatare being discussed, but others, including Panasonic, Sharp,Hitachi and Philips may also be of dual pricing tactics to consider.
According to the complaint from the Interactive Media in RetailGroup (IMRG) and was their claim that the work of dual pricing as astrategic anti-competitive harm consumer interests. Dual pricing is the mechanism of the recently introduced electronic consumer goods manufacturers whereby traders to pay more for goods ifsold on the Internet.
IMRG claimed that there is no economic justification for dual pricing and the defense that it costs more to run the "brick andmortar" retail trade compared with the online business bothirrelevant and open to dispute. In a press release they claim that
Sony has been in the newspapers as one of the manufacturers thatare being discussed, but others, including Panasonic, Sharp,Hitachi and Philips may also be of dual pricing tactics to consider.
Price fixing in the dairy industry
Office of Fair Trading is investigating claims that some of those involved in the UK higher dairy processing companies in determining the price agreement. Dairy Crest and Robert Wiseman, and the United Kingdom are two of the top three dairy processors are under the microscope and Arla Foods may also be part of a wider range of investigation, which focuses on the decision of the dairy processors to increase in conjunction price of milk paid to farmers in the UK. But this investigation is very fierce criticism from fans farming industry who believe that unless effective steps are taken to raise the prices and incomes flowing to milk producers, the industry itself could collapse with the loss of thousands of jobs.
Market Liberalization
The main principle of competition policy in the European Union is that the best interests of consumers through the introduction of competition in markets where there is monopoly power. In many cases, the monopolies in the industry, for example, transport, energy and telecommunications. In these sectors, it is necessary to distinguish between infrastructure and services provided directly to consumers using this infrastructure.
While it is often difficult to identify a second, and infrastructure, competing, for reasons linked to investment costs and economic efficiency (ie the arguments of natural monopoly is linked to the economies of scale and high efficiency wide minimum), it is possible and desirable to create competitive conditions in the condition of respect for the services.
The European Commission has developed the concept of separating infrastructure from commercial activities. Infrastructure and thus a means of competition. While the right to exclusive ownership may continue with respect to infrastructure (telephone, electricity, for example, or supply of gas and electricity for households and individual business), monopolists must grant access to companies wishing to compete with them with regard to services offered on their networks (and there are good examplesmarkets include telephone calls or supply of electricity and gas).
While it is often difficult to identify a second, and infrastructure, competing, for reasons linked to investment costs and economic efficiency (ie the arguments of natural monopoly is linked to the economies of scale and high efficiency wide minimum), it is possible and desirable to create competitive conditions in the condition of respect for the services.
The European Commission has developed the concept of separating infrastructure from commercial activities. Infrastructure and thus a means of competition. While the right to exclusive ownership may continue with respect to infrastructure (telephone, electricity, for example, or supply of gas and electricity for households and individual business), monopolists must grant access to companies wishing to compete with them with regard to services offered on their networks (and there are good examplesmarkets include telephone calls or supply of electricity and gas).
State Aid in Markets
Argument for state aid to be given control of private sector companies and the State by the Government is a member by giving certain firms or products preferential treatment at the expense of other companies or products, state aid disrupts normalcompetitive forces. According to the Competition Commission in the EU, none of the beneficiaries of state aid and their competitorsin the long term prosperity. In most cases, government support to achieve is to delay the restructuring is inevitable without the help ofthe recipient actually to return to the cost and the ability to non-pricecompetition. Companies can not be subsidized to compete with those receiving public support in the run up to the end of thedifficulties, resulting in a loss of competitiveness and jeopardize the jobs of their employees.
Under the current rules of the European state aid, and can save a company once. However, it is necessary to approve anyrestructuring aid provided by the national government as part of theplan is viable and coherent to restore the company in the long term.And usually allows the government assistance, which aims topromote research and development, and regional economic development and promotion of small enterprises.
Under the current rules of the European state aid, and can save a company once. However, it is necessary to approve anyrestructuring aid provided by the national government as part of theplan is viable and coherent to restore the company in the long term.And usually allows the government assistance, which aims topromote research and development, and regional economic development and promotion of small enterprises.
Economic arguments for not approving a merger:
Under what circumstances might the EU Competition Authorities block a merger/takeover or insist on some form of redress before permitting it to proceed?
Monopoly power:
Mergers and acquisitions, the creation of market dominance, and are exploiting consumers and the misallocation of resources if there are barriers to enter the competition in the market, leading to failure and loss of economic welfare. In fact, there are always barriers tocompetition in the markets, especially in industries where sunk costsare high.
Mixed evidence on benefits of mergers:
The evidence is mixed as to whether mergers improve companies' performance, either in terms of profitability, or cost savings – indeed many of the claims for increased efficiency and economies of scale made prior to a merger or a takeover prove to be exaggerated with the benefit of hindsight.
Employment effects
Mergers and acquisitions are almost always lead to a rationalizationas part of the process of reducing costs but may be at the expense of the function (the possibility of structural unemployment), and a smaller number of ports / choice for consumers (and this is a matterof equity)
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