Government Intervention Flashcards
Who are the CMA
They are the Uk’s most significant regulator
what’s a merger
combining of two organisations
What are the theme 3 types of government intervention
Merger Policy
Profit Regulation
Price Regulation
Quality and Performance standards
What’s Merger Policy
CMA investigates whether mergers should go ahead or not and evaluate whether it’ll be good for society
what are conditions for merger policy
Combined Market Share of firms is over 25%
Combined firms have annual turnover of 70m+
if this happened the merger would be rejected
Why would CMA not want mergers to happen
Lead to:
High Barriers to entry
High prices
Less choice
Decrease in contestability
What is Price Regulation
Regulators setting prices to make sure they are below profit maximising point
What are the two types of “price regulation formula”
Firms that make a greater SNP have RPI-X (Energy companies)
Firms that make less SNP have RPI+K like water companies
What’s the point of price regulation
Gives an incentive to firms to be more efficient as possible
What is Profit Regulation
Maximum amount of profit a firm can make to make sure not x inefficient
What’s main purpose of profit regulation
Promote Dynamic efficiency more to encourage investment
What do firms do in response to profit regulation
Lower costs by benefiting from internal economies of scale
What is Performance Targets and Quality Standards
Making sure good quality is maintained throughout products
Making sure targets are met
e.g Scots Rail Target of getting to places within 5 mins
What are the new types of Government Intervention
Merger Policy
Quality Standards
Performance Targets
Price Regulation
Profit Regulation
Deregulation
Nationalisation
Privatisation
Stopping Anti competitive practices
Competitive Tendering
Helping Small Businesses
What is Deregulation with an example
The removal of regulations or restrictions within an industry
Royal Mail were only delivery service until 2006 until they deregulated that rule now have DHL etc
What is Nationalisation with an example
Where government takes control of ownership of a privately owned business or industry
Bank of England nationalised until 1946. used to be one by shareholders
What is Privatisation with an example
Transfer of ownership from government to private firms
British Airways
BT
British Gas
What is stopping anti competitive practices
Merger policy, price regulation, profit regulation etc
What is Competitive Tendering with an example
Private Companies bid against each other for the opportunity to provide goods and services as the government can’t afford to do so.
Quality checks given
Laundry Services in hospitals
School Meal Services
What is Helping small businesses
Government providing grants to small businesses to increase amount of firms in that sector
Offering 50% go food and nonalcoholic drinks to small businesses during Covid
