competition policy Flashcards
UK competition policy eval
Only a few mergers are referred in 1997 10/186. Most of these were prohibited, perhaps more should be referred
Size and scope of market is important for determining policy, a narrower market gives rise to greater concentration
Mergers depend on industry and local conditions
Pragmatic. Dominant market power doesn’t necessarily lead to market dominance. Contestability is very important, if there is freedom of entry and exit the market will be competitive
Secret and tacit collusion difficult to tackle.
High fines do bite e.g. British Steel and toy companies
Competition in UK has to be weighed against international strength - other positives of monopoly
extra
Stuff to do with regulation and privatisation
EU competition policy (macro also)
The European Commission ensures that European competition policy is implemented. The legislation is contained in Article 101 of the Treaty on the Functioning of the European Union (1958). The main areas of legislation include rules on antitrust, mergers, cartels, and State aid.
EU competition policy - Antitrust
Antitrust legislation covers two key areas:
Agreements between two or more firms which restrict competition, such as price fixing or market sharing.
Abuse of dominant position, such as attempting to push a rival out of a market by predatory pricing. Since 2004, national regulators (e.g. the UK) are empowered to apply the EU rules. The rules apply to trade between member states in the common market.
EU competition policy - mergers
If a merger involves firms whose turnover is above a particular threshold it may be examined solely by the European Commission - the threshold is a combined worldwide sales of €5bn, and €250m within the European common market.
The merger may be restricted or prevented if it impedes competition significantly and therefore adversely affects consumers.
Parties may agree to take particular steps to mitigate the reduced competition, and therefore avoid prohibition – such as granting a license to another company to use the technology of the companies involved in the merger.
EU competition policy - Cartels
Cartels are illegal under EU competition law. Because cartels are hidden from view, the Commission offers an incentive of ‘no-fine’ for the first member of a cartel to provide information (i.e. to become a whistle-blower).
EU competition policy - state aid
In general terms, EU Treaty law forbids national governments from giving unfair assistance to its industries – such as through subsidies. However, there are some exceptions, including development aid for especially poor regions, or where the social benefits of aid will not distort the operation of the single market - for example, areas with very high unemployment.
