Competition Policy

Question 1

What are the main aims of competition policy

Answer 1

To promote competition; make markets work better and contribute towards improved efficiency in individual markets and enhanced competitiveness of U.K. businesses within the EU single market

Question 2

What does competition policy aim to ensure

Answer 2

• technological innovation such promote dynamic efficiency
• effective price competition between suppliers
• safeguard and promote the interests of consumers through increased choice and lower price levels

Question 3

What are the four key pillars of competition policy in the U.K. And in the European Union

Answer 3

1. Antitrust and cartels
2. Market liberalisation
3. State aid control
4. Merger control

Question 4

Antitrust and cartels

Answer 4

Involved the elimination of agreements that restrict competition including price fixing and other abuses by firms who hold a dominant market position (defined as having a market share in excess of forty per cent)

Question 5

Market liberalisation

Answer 5

Involves introducing competition in previously monopolistic sectors such as energy supply, retail banking, postal services, mobile telecommunications and air transport

Question 6

State aid control

Answer 6

Competition policy analyses state aid measures such as airline subsidies to ensure that such measures do not distort the level of competition in the single market

Question 7

Merger control

Answer 7

This involves the investigation of mergers and take overs between firms (e.g. A merger between two large groups which would result in their dominating the market)

Question 8

What are regulators

Answer 8

The rule enforcers and they are appointed by the government to oversee how a market works and the outcomes that result for producers and consumers

Question 9

What is the main competition regulator in the U.K.

Answer 9

The competition and markets authority (CMA)

Question 10

Examples of competition policy in action: de regulation - laws to reduce monopoly power

Answer 10

• preventing mergers/acquisitions that create a monopoly
• laws to introduce competition into the postal services industry
• forced sales of assets e.g. BAA and airports in the U.K.

Question 11

Examples of competition policy in action: privatisation- transferring ownership

Answer 11

• stock market flotation at the Royal Mail
• part privatisation of network rail similar to the sell off of HS1- the high speed link that connects London to the channel tunnel

Question 12

Examples of competition policy in action: tough laws on anti-competitive behaviour

Answer 12

• strong laws and penalties against proven cases of price fixing or collision that involved market sharing
• companies breaching EU and UK competition rules risk hefty fines of up to 10% global turnover

Question 13

Examples of competition policy in action: reductions in import controls

Answer 13

• a reduction in import tariffs encourages cheaper products from overseas
• increasing or eliminating import quotas can also have the same effect
• allowing new countries into the EU single market increases contestability