Explain one aim of competition policy
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The main aims of competition policy are to promote competition; make markets work better and contribute towards improved efficiency in individual markets and enhanced competitiveness of UK businesses within the European Union (EU) single market.
Competition policy aims to ensure
Technological innovation which promotes dynamic efficiency in different markets
Effective price competition between suppliers
Safeguard and promote the interests of consumers through increased choice and lower price levels.
There are four key pillars of competition policy in the UK and in the European Union
Antitrust & cartels: This involves 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)
Market liberalisation: Liberalisation involves introducing competition in previously monopolistic sectors such as energy supply, retail banking, postal services, mobile telecommunications and air transport
State aid control: 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
Merger control: 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)
Main Roles of the Regulators
Regulators are 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
The main competition regulator in the UK is the Competition and Markets Authority (CMA)
The European Union Competition Commission is also an important body for the UK
Examples of competition policy in action
De-regulation - laws to reduce monopoly power
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 UK
Privatisation - transferring ownership
Stock market floatation of the Royal Mail
Part-privatisation of Network Rail similar to the sell-off of HS1 - the high-speed link that connects London's St Pancras to the Channel tunnel, on a long-term concession
Tough laws on anti-competitive behaviour
Strong laws and penalties against proven cases of price fixing or collusion that involves market sharing
Companies breaching EU and UK competition rules risk hefty fines of up to 10 per cent of global turnover - senior executives can be jailed
Reductions in import controls
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 European Union single market increases contestability.
Hope, it may help you.
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