Question

Question: Evaluate the impact of competition policy and other regulatory mechanisms on the activities of a selected organisation.

Guidlines

Choose any UK based national or international organisation e.g. Tesco, BAA, Primark, and discuss a competition policy (Competition Act 1998) and how it is constrained by competition policies e.g. regarding monopolies, by regulations and by authorities (Competition Commission, Office of Fair Trading; Directorate General for Competition); European Commission); sector regulators e.g. Ofgem, Ofwat, Civil Aviation Authority; Companies Acts; regional policy; industrial policy; training and skills policy

Always give examples to support your answers.

Answer 1

Competition policy is integrated into the UK’s general policy framework for regulation in several complex ways. The role of competition policy in regulatory reform is recognised in practice and in recent statements of principle. As regulatory reform stimulates structural change, vigorous enforcement is needed to preclude the possibility that private market abuses might reverse the benefits of reform. In the UK, structural change predated stronger competition law by a decade or more, stretching the capacities of specialised regulators to deal with the market power that resulted from widespread privatisations. Mainstream competition policy instruments have now been modernised and integrated more closely with the roles played by specialist regulators.

In any assessment of the relationship between competition and regulation, the threshold, general issue is whether regulatory policy is consistent with the conception and purpose of competition policy. There are four particular ways in which competition policy and regulatory problems may interact: • Regulation can contradict competition policy. Regulations may have encouraged, or even required, conduct or conditions that would otherwise be in violation of the competition law. For example, regulations may have permitted price co-ordination, prevented advertising or other avenues of competition, or required territorial market division. Other examples include laws banning sales below costs, which purport to promote competition but are often interpreted in anti-competitive ways, and the very broad category of regulations that restrict competition more than is necessary to achieve the regulatory goals. When such regulations are changed or removed, firms affected must change their habits and expectations. • Regulation can replace competition policy. Especially where monopoly has appeared inevitable, regulation may try to control market power directly, by setting prices and controlling entry and access. Changes in technology and other institutions may lead to reconsideration of the basic premise in support of regulation, that competition policy and institutions would be inadequate to the task of preventing monopoly and the exercise of market power. • Regulation can reproduce competition policy. Regulators may have tried to prevent co-ordination or abuse in an industry, just as competition policy does. For example, regulations may set standards of fair competition or tendering rules to ensure competitive bidding. Different regulators may apply different standards, though, and changes in regulatory institutions may reveal that seemingly duplicate policies may have led to different outcomes. • Regulation can use competition policy methods. Instruments to achieve regulatory objectives can be designed to take advantage of market incentives and competitive dynamics. Co-ordination may be necessary, to ensure that these instruments work as intended in the context of competition law requirements.