7.4a Political and Legal: Scope and Effects of Competition Law Flashcards
Legislation and regulation protect who?
Those with weaker bargaining power
Main roles of business legislation:
- Ensure competition is fair
- Employees are treated fairly
- Consumers receive fair deal
What is the aim of competition policy?
To make sure that businesses can fairly enter a market and compete against other firms
Competition policy is in place so that there is:
- Wider consumer choice
- Technological innovation
- Price competition
Why do businesses need to be aware of competition policy?
- To ensure it does not breach competition law
- To protect its position where competition law is breached by a competitor
What are the three main types of anti-competitive activity that UK/EU competition law prohibit?
- Anti-competitive agreements
- Abuse of dominant market position
- Merger control
Example of anti-competitive agreement
Agreements which directly or indirectly fix purchase or selling prices
What is considered anti-competitive from a business?
- Agreeing prices with competitors
- Imposing minimum prices on different distributors
- Cut prices below cost
What is considered a dominant market share?
50%
Example of abusing dominant positions
Imposing unfair trading terms e.g. “you can only buy from us”
Penalties for getting caught abusing a dominant market position
- Fine of up to 10% of annual turnover
- Criminal prosecution
- Disqualification
What is a merger?
The process of two businesses joining together
When is a merger usually prevented?
When the joint market share of the two companies together would be greater than 25%
Advantages of competition law
- Allows a business to compete on an even playing field
- Makes sure markets, suppliers and other resources are not excluded from particular groups
Disadvantages of competition law
- Cannot charge the lowest price possible
- Increases costs
- Has restrictions on how it can behave.
