Competition policy is the structure governments have in place for the regulation of markets and monopolies. Competition policy generally aims to:
- Prevent growth of Monopoly power
- Prevent abuse of Monopoly power and restrictive trading practices
- To protect consumers from high prices and poor quality.
- Investigate suspected abuses of monopoly power and recommend policy decision.
- Reduce barriers to entry and keep markets contestable.
- To ensure small and new businesses can enter the market.
Examples of Anti-Competitive Behaviour
- Price fixing: When rival firms secretly agree to charge the same price instead of competing.
- Cartels: Groups of firms that collude to control prices or supply.
- Abuse of monopoly power: When a dominant firm sets unfair prices or blocks rivals from entering the market.
- Predatory pricing: When a large firm sets prices very low to drive competitors out, then raises them later.
- Mergers reducing competition: When two big companies join and gain too much control over the market.
Competition Policy Agencies
In the UK, there are 2 main government bodies responsible for Competition Policy
- Competition and Markets Authority (CMA) The CMA investigates mergers, anti-competitive agreements, and abuse of market dominance. It can block mergers, impose fines, or require companies to change their behaviour if they restrict competition.
- Office of Fair Trading. (OFT) responsible for investigating abuses of monopoly power. Has the power to refer potential mergers to Competition Commission for investigation
On some occasions ,governments have encouraged self-regulation. i.e. industries agree to regulate themselves knowing that failure to deal with problem will lead to government intervention.
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