Competition Policy

- also known as Antitrust

This page introduces you to UK Competition Policy, and links you to other pages which provide more detail.

Other things being equal, it is a good thing if firms compete hard with each other. It encourages them to be efficient and innovative, and to meet the needs of consumers. In principle, therefore, it is a good thing if there are hundreds of firms all competing to sell similar goods and services, and if their customers have reliable and comprehensive information about all the goods and services that are on offer.  However:

On the other hand, large manufacturing companies, businesses which are protected or subsidised, or companies which dominate an industry, can too easily become complacent and inefficient; and they may go even further and exploit their positions in order to charge higher prices and make excessive profits.  Governments in all modern economies have accordingly developed a range of policies which seek to balance one need (to grow large and efficient companies) against the other need (to protect customers against exploitation). These policies target these ...

Seven Types of Potentially Anti-Competitive Behaviour 

  1. Government protection, preference and subsidies
    • (These behaviours are tackled in the European Union by developing and defending the single market for goods and services, and by prohibiting most state aids.)
  2. Protecting inventions etc.
    • (Intellectual property legislation forbids the copying of new inventions for a number of years, but then competitors are then allowed to make their own copies)
  3. Price fixing ("cartels")
  4. Abuse of dominant position
  5. Merger Control
  6. Inefficient Markets ("Market Studies and Investigations")
  7. Utility monopolies and oligopolies

In addition, the UK government is increasingly keen to see customers claim compensation (by taking private actions) when a cartel or dominant company causes them damage. 

And the government should also ensure that its own regulations and legislation - often introduced so as to protect customers - do not in fact freeze markets so that new business practices (such as those developed by low cost airlines) cannot come to the fore.

The wider benefits (and dis-benefits) of competition are summarised here.

Then, as well as following the above links, you may wish to consider these ...

... Key Issues in Economic Regulation

The Agencies

Within the UK government, policy development in most of the above areas is the responsibility of the the Department for Business. Day-to day, however, all the policies (except private actions) are delivered through specialist agencies, as follows:

Further Reading

A short introduction to UK competition policy (written especially for economics students) is here.

The standard text for those that want to delve more deeply is probably The Antitrust Revolution - Economics, Competition, and Policy by John Kwoka and Lawrence White.

Martin Stanley