Competition Policy content slideshow. Designed for the Economic A level qualification. Can be used in revision and in class. Subtopics Intro to Competition Policy The Competition and Markets Authority (CMA) Evaluation of Competition Policy

1. Competition
Policy
Upper 6th Micro
Government Intervention
(U6th)

2. Intro to
Competition
Policy
Competition Policy
Mr O’Grady

3. Intro to Competition Policy
Competition (recap): rivalry amongst sellers as they try to increase sales, profits
and market share, through cutting prices or improving non-price factors such as
quality or choice
Competition Policy: Gov. intervention aiming to ensure that competition is not
restricted or undermined in ways that are detrimental to the economy and society
Aims of Competition Policy:
1) creating wider consumer choice and protecting consumer interests
2) promoting dynamic efficiency through technological development
3) ensuring effective price competition between firms.
Competition Policy Instruments:
Privatisation: The sale of state-owned businesses to the private sector
Regulation: Government imposed rules to restrict the freedom of private industries to set
their own prices/set their own standards of quality
Deregulation: Where the government removes or simplifies restrictions on entering an
industry with the aim of stimulating new competition and promoting economic efficiency

4. The Competition
and Markets
Authority (CMA)
Competition Policy
Mr O’Grady

5. The CMA
CMA: a government department responsible for strengthening competition and
preventing and reducing anti-competitive activities
Focuses: Three key aspects of competition law the CMA deals with:
Anticompetitive agreements (ACA): agreements to distort competition by cooperating with
competitors, e.g. collusion
Abuse of a Dominant Position (ADP): normally viewed as a firm having >40% market share as
this can lead to anticompetitive results such as unreasonably high prices, artificially low
prices, compulsory link purchases
Mergers and Acquisitions (M&A): CMA must determine whether there would be a
substantial loss of competition if the merger took pace
Sainsbury’s-ASDA Blocked Merger: in 2019 the CMA prevented Sainsbury’s from
acquiring rival super market ASDA from US company Walmart in a £7bn deal
The CMA found that UK shoppers and motorists would be worse off if the two were to merge
This is due to expected price rises, reductions in the quality and range of products available,
or a poorer overall shopping experience.

6. Evaluation of
Competition
Policy
Competition Policy
Mr O’Grady

7. Evaluation of Competition Policy
Evaluation of competition policy:
Very few mergers are actually investigated. Despite heavy fines, covert collusion is difficult to
prove.
Tacit collusion is almost impossible to prove.
‘Single’ markets are often inadequately defined.
Fines can damage the future prospects for firms and deter them from setting up in the UK.
There is a problem of ‘cheating’ or ‘finding loopholes’, such as getting round the regulations
by moving into an adjacent market.
Dominant market share won’t always lead to market dominance. Contestability is very
important.
International competitiveness concerns.
Regulatory capture: where the regulator is captured or hijacked by the regulated.
This occurs because firms pressurise regulators intensely, often through lobbying.
Two processes increase the likelihood of regulatory capture:
1. Increased exposure to firms encourages regulators to ‘see things from their perspective’
and develop an understanding of and empathy towards the regulated.
2. Firms develop a deep understanding of the details of the regulation and learn how to ‘play
the system’.

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