T3 Regulation and Competition Policy

Question 1

What are the 4 Uk regulations in place?

Answer 1

Merger Policy
Price regulation
Profit regulation
Performance target and quality standards

Question 2

Describe the merger policy limit

Answer 2

Combined market share over 25%

Question 3

The CMA will investigate a merger for what two reasons:

Answer 3

1. If the merging firms will have over 25% market share together (like 3 and O2)
2. The “turnover test”: if the merging firms have a combined annual turnover above £70m

Question 4

If RPI is 3%, and -X (efficiency gains) is 2%
, how much can energy firms increase their prices by:

Answer 4

1%

Question 4

what is rpi

Answer 4

Retail Price Index, An economic indicator measuring inflation by tracking the change in the cost of a fixed basket of goods and services.

Question 4

there are two main types of price regulation - what are they:

Answer 4

RPI-X, RPI + K

Question 5

regulatory capture is when:

Answer 5

Regulatory capture is when a regulator begins to favour the company they’re regulating.

Question 6

Profit regulation is when:

Answer 6

firms’ profits are taxed at
100% above a certain limit

Question 7

Define privatisation:

Answer 7

Privatisation is when the government transfers ownership of a public sector firm to the private sector.

Question 8

competitive tendering is when:

Answer 8

Competitive tendering is when the government outsources specific job contracts to the private sector

Question 9

Competitive tendering is great for the government because:

Answer 9

Competitive tendering beneficial for the government because, by getting private sector firms to bid against each other for the contract, private sector firms will undercut each other’s prices and offer better quality.

Question 10

What are anti-competitive practices?

Answer 10

anything a firm might do, to restrict competition.

Question 11

predatory pricing is when:

Answer 11

when a firm aggressively cuts its prices below AVC to force out competitors from the market.

Question 12

price collusion is when:

Answer 12

when two or more firms agree to limit or restrict competition.

Question 13

vertical integration is when

Answer 13

Vertical integration is when firms at different stages of the same production process join together.

Question 14

In response to anti-competitive behaviour, the CMA can: (3)

Answer 14

1. Set a fine up to 10% of annual revenue
2. Sentence CEOs to jail time
3. Name and shame the firm publicly

Question 15

What is the CMA

Answer 15

Competition and Markets Authority in the UK

Question 16

what is Nationalisation

Answer 16

Nationalisation is when the private sector transfers ownership of a private sector firm to the government.

Question 17

What is deregulation

Answer 17

Deregulation is when regulations are removed to lower barriers to entry.