Transcript Competition Policy

Consumers
Aims to afford some parity of power to consumers.
KEY LEGISLATION:
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Sale of Goods Act
Trade Descriptions Act
Fair Trading Act
Consumer Credit Act
Unfair Contract Terms Act
Consumer Protection Act
Students need to appreciate the key responsibilities outlined in these Acts and how any
dispute would be resolved.
Competition Policy
Aims to: prevent unfair competition and to encourage fair play in the market place.
Powerful firms may try to improve their position via entry barriers / restrictive practices /
collusion or even price agreements.
Competition policy aims to prevent this abuse of size &/or power. It aims to ‘protect the public
interest’ and encourage productive efficiency.
In the future, European competition policy will dictate what is acceptable.
KEY LEGISLATION
1. Monopolies & Restrictive practices act (1948)- This established the MMC. To investigate
monopolies (firms with a market share of >25% or have assets >£70m). Nowadays the
parameters are that a firm is investigated if it is though to be ‘against public interest’.
2. Fair Trading act (1973)- Set up OFT which, headed by the DGFT refers cases to the MMC.
Usually the threat is enough to prevent mergers.
3. Restrictive practices act (1976)- Requires firms to register agreements, which may restrict
competition. The restrictive practice court provides a judgement.
4. Resale price act (1976)- Prevents suppliers and retailers enforcing a minimum price, BUT
recommending a resale price is illegal.
5. Competition policy (1980)- Anti competitive practices made subject to investigation and
ultimate prohibition.
The Impact of Competition Policy
Competition policy is always controversial; some see it as an intervention, restricting market
forces, while others see it as the only way of ensuring that competition occurs.
‘Public interest’ is very hard to define (a stakeholder question).
Are all monopolies bad? What about the benefits gained from R&D, EofC, etc.
It really is a question of Intervention vs. Laissez-faire’.
General points:
Firms try to avoid increases in legislation via self-regulation. For this to work they must be
abreast or ahead of public expectations in order to make laws unnecessary.
High profile firms are least likely to ignore legal requirements (reputations take years to
acquire and minutes to lose).
A firm’s culture is important. In the long term, legislation can affect culture, but in the short
term culture is often more powerful than law in determining behaviour.
Large firms often have ethical codes, which ensure compliance with the law is a bare
minimum. Smaller firms depend more on attitudes of their owners.