The importance of competition policy
An Office of Fair Trading case study

Page 1: The purpose of competition policy

Competition is an essential element in the efficient working of markets. It brings important benefits to the consumer by: encouraging enterprise, innovation, efficiency and a widening of choice; enabling consumers to buy the goods and services they want at the best possible price; and contributing to our national competitiveness. Competition policy seeks to encourage and improve the...
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Page 2: United Kingdom competition law

United Kingdom (UK) competition law is a flexible instrument. With one exception, the legislation is based on the premise that each case should be judged by the actual effect which a practice has on competition and whether it is against the public interest. The public interest has a broad meaning and is not precisely defined in the legislation.UK competition law involves a range of legislation but...
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Page 3: Who is responsible for UK competition law?

Enforcement of the law generally falls into the following stages: investigation; judging the merits of the case; recommending suitable remedies; deciding whether to implement the remedies; and monitoring those remedies which are implemented. Four principal bodies have interlocking responsibilities for enforcement. The Director General of Fair Trading is the independent head of the Office of...
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Page 4: Mergers

Under the Fair Trading Act, a merger is said to take place when two or more enterprises cease to be distinct. Once they come under common control, for example, in a situation where a minority stake allows one party to have a material influence over the policy of the other party, the Act sets out two tests to determine whether a particular merger can be investigated. The assets tests: that the...
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Page 5: Monopolies

Where a company or group of companies has a sizeable share of a market, it can have sufficient market power to harm competitors and consumers. Excessive prices and reductions in quality of service are typical examples of what happens when the absence of effective competition allows the exploitation of a monopoly position within a market.Although a monopolist is often thought of as the sole...
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Page 6: Anti-competitive practices

In a competitive market, companies can be expected to adopt policies intended to give them a competitive edge. This can lead to benefits such as improved efficiency and better quality goods.Under the Competition Act, an anti-competitive practice is defined as any practice that has, is intended to have, or is likely to have, the effect of restricting, distorting or preventing competition. The...
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Page 7: Restrictive trade practices

All commerce is based on agreements of one form or another. Some agreements however, may restrict competition. The most obvious are those involving price fixing and market sharing.The Restrictive Trade Practices Act covers agreements affecting goods and services. The OFT must be notified of all arrangements, not just formal written agreements, made by two or more parties in business who accept...
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Page 8: Resale price maintenance

Attempts by manufacturers or suppliers to enforce a minimum price at which goods can be sold by dealers or retailers restrict competition and can keep prices higher than they would otherwise be. Such resale price maintenance is illegal under the Resale Prices Act, unless the goods are granted an exemption. Only books and certain pharmaceuticals are currently exempted.The Act also makes it...
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Page 9: European Union competition law

Article 85 of the Treaty of Rome forbids agreements which may affect trade between the 15 Member States, and which have, as their object or effect, a limitation of competition. This includes price fixing, market sharing, restriction of production or technical development, and the imposition of discriminatory terms of supply.Such agreements are void unless given an exemption by the European...
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