Business EnvironmentHNC/HND Unit 1 2011-12

Competition Policy

To explore the role of market legislation and regulation in the UK. In particular the role of the Competition Commission and other regulatory bodies such as Oftel, Ofgem etc

Aim of the session

To explain the role of the Competition Commission and other regulatory bodies in the UK.

To discuss their impact on organisations and consumers

Learning Outcomes

You are required to produce an essay of no more than 3000 words (font size 12) which answers the following question:

“The market environment and the national environment in which an organisation operates shape the decision making, behaviour and activities of that organisation” Discuss using examples.

You will be expected to describe and evaluate the following in relation to your chosen organisation: ◦ The type of economic systems that exist (free market, closed

economy etc.)◦ Governmental policies regarding fiscal and monetary policies◦ Competition policy and regulatory practices. ◦ Different market types (monopoly, oligopoly etc.) ◦ Market forces (supply and demand, economies of scale etc.) and

organisational responses to these forces.

Task 2

In the United Kingdom regulation takes different forms:

◦ Legislation

◦ Competition Policy

◦ Office of Fair Trading (OFT)

◦ Competition Commission

◦ Regulation of former nationalised industries

◦ Self-regulation

Government Regulation

The Fair Trading Act (1973) Dealing with monopolies and mergers

The Competition Act (1988) Dealing with anti-competitive practices Ch I: Prohibition of anti-competitive agreements, based on

Article 81 of EC treaty Ch II: Prohibition of abuse of a dominant position in a

market, based on Article 82 of EC treaty

Articles 85 and 86 of the Treaty of Rome Where restrictive practices and mergers have an effect on

interstate trade

Government Regulation: Legislation

Main areas of concern to competition authorities are:◦ Resale price maintenance permitting max or min prices

to be fixed by producers

◦ Exclusive distribution agreements

◦ Exclusive dealing agreements

◦ Tie-in sale agreements

◦ Quantity forcing downstream firms to purchase min quantities

Government Regulation: Competition Policy

Established by the Enterprise Act 2002

Members are appointed by Secretary of State for a maximum of 5 years

OFT’s job is to make markets work well for consumers◦ Ensuring fair and open competition◦ Ensuring consumers have as much choice as

possible

Office of Fair Trading (OFT)

Brief history◦ The CC replaced the Monopolies and Mergers

Commission in 1999, following the Competition Act 1998.

◦ The Enterprise Act 2002 introduced a new regime for the assessment of mergers and markets in the UK.

◦ The CC’s legal role is now clearly focused on competition issues.

◦ The Enterprise Act also gave the CC remedial powers to direct companies to take certain actions to improve competition.

Competition Commission (CC)

Conducts in-depth inquiries into mergers, markets

Regulates the major regulated industries

Inquiries initiated by the Office of Fair Trading or Secretary of State, or the

Competition Commission

Regulate the former nationalised industries

The regulators influence pricing policy, competitive strategy and the structure of the industry

Regulatory Bodies

On the next slide there are links to information about a range of regulatory bodies

Find out about the most recent activities / reports of one of the mentioned regulatory bodies.

What issues have they scrutinised in relation to these industries?

What is the impact on the organisations and their consumers?

Group Activity in Pairs (30 mins)

Ofwat

Ofgem

Ofcom

Ofsted

Office of Rail Regulation

Regulatory Bodies

Body Issues Impact

Group Feedback

Main legislation and regulation relating to market control

Competition Commission

Regulatory bodies

Summary of session