The document discusses the importance of competition in the UK, highlighting how it benefits consumers through lower prices and increased choice, while also driving productivity growth. It provides examples of the positive effects of deregulation in various sectors, demonstrating that competition encourages innovation and better service delivery. Additionally, it outlines the regulatory processes for assessing competition impacts and the measures that can promote a more competitive market environment.

1. Competition Assessment: UK
Rachel Holloway
Regulatory Delivery

2. Objectives
• Why is competition important?
• Benefits of competition and UK case studies
• Assessment approaches to competition in the UK
• Q & A

3. Competition and its importance
• Competitive markets benefit consumers through lower prices and
greater choice, by encouraging suppliers to create new products and
different ways of bringing products to markets.
• There is a strong evidence showing that competition can drive greater
productivity.
• Within-country studies demonstrate a positive relationship between strength of
competition and productivity growth across sectors.
• Cross-country studies suggest that countries with lower levels of product market
regulation, enabling stronger competition, tend to have higher levels of productivity
growth.
• Extensive studies show generally strong positive effects on
productivity in sectors where deregulation has occurred, including
transport and utilities.

4. Competition and its importance
• Competition is a process of rivalry between firms and, where it is
effective, encourages firms to deliver benefits to customers in
terms of lower prices, higher quality and more choice.
• Competing firms may focus on offering the lowest price,
particularly where products are standardised.
• Most suppliers will try to compete in a number of ways in addition
to price, for example by developing new improved products, by
offering products of differing quality or characteristics, by branding
and advertising the differences in their products relative to their
competitors', or by using different sales channels.
• Competing suppliers will seek to find a unique selling point that
offers consumers advantages over rival goods or services.

5. Deregulation & Competition
Three examples of benefits of deregulation and
Competition
1.The liberalisation of European air routes by the European
Commission facilitated the entry of a number of new low
cost carriers. These carriers introduced new business
models, including new booking methods and extensive use
of outsourcing. In addition to increased consumer choice,
the price of an economy class ticket provided by traditional
carriers on European routes fell by over 66% between 1992
and 2002.

6. Deregulation & Competition
2. The deregulation of international telephone calls has
provided consumers with greater choice of providers and
significant decreases in the price of UK international calls,
down 90% over the decade to 2002.
3. The 1997 prohibition in the UK of the Net Book
Agreement, an agreement between publishers not to
supply books to retailers that priced below the publisher's
net price, led to a dramatic reduction in the price of
popular paperback fiction, with discounts on bestsellers
and 'multi-buy' offers such as two-for-one now regularly
being seen. In addition, it has helped promote and grow
new efficient distribution models such as sales via the
internet.

7. Example of Managing Competition
Exclusive rights to manage the data and communications network to
connect smart meters
The Department of Energy & Climate Change granted Smart Data
Communications Company Ltd (DCC) a licence in September 2013 to
establish and manage the data communications network connecting
smart meters to the business systems of energy suppliers, network
operators and other authorised service users of the network.
In order to mitigate the risk that DCC faces no competition it has
been granted an exclusive licence, through a competitive tender
process, for a fixed term. For example, competition introduced in the
non-domestic water supply.
DCC also operates under an ex-post price control regime whereby
Ofgem closely scrutinises costs and revenues to ensure value for
money.

8. Benefits to Consumers

9. How Does RIA Do This?
• Within the assessment of regulatory proposals,
government regulators need to identify who will be
affected by the proposal
• This includes identification of the markets likely to be
affected, both product and supply markets
• The consultation process can help to identify and
understand the supply chain in a market

10. Competition Assessment & RIA: UK process
• Part of IA process – Step 4: Identify the impacts
1.What are the impacts on competition?
2.Will the number or range of suppliers be limited?
3.Will their ability to compete be limited or the incentive to
compete vigorously be reduced?

11. Competition Assessment: Guidance

12. Competition Assessment: screening Q’s

13. Competition Assessment: checklist

14. Pro-competition measures
• Measures which increase competition can reasonably be
expected to drive economic growth and benefit society. In
assessing whether a measure can be classified as pro-
competition, you must provide positive responses to ALL of the
following questions:
1. Is the measure expected to promote competition? Promoting
competition can be achieved through any of the following
mechanisms:
1. Directly increasing the number or range of sustainable suppliers
Indirectly increasing the number or range of sustainable suppliers
Strengthening the ability of suppliers to compete
2. Increasing suppliers' incentives to compete vigorously

15. Pro-competition measures
2. Is the net impact expected to be an increase in
competition (i.e. if a policy fulfils one of the criteria but
results in a weakened position against another)?
1. Is promoting competition the primary expected impact of the policy
3. Would it be reasonable to expect a net social benefit
from the policy (i.e. benefits to outweigh costs), even
where all the impacts may not be monetised?

16. What Is The Link To Competition Assessment?
• As part of the overall assessment of the impacts of
regulatory proposals, RIA requires analysis of the economic
impacts of regulatory proposals, both positive and negative
• This includes consideration of the potential impacts on
competition in affected markets to assess whether or not
the proposal is likely to have a significant impact on
competition

17. In Any Affected Market Would The Proposal...
4.Limit the choices & information available to consumers?
For example, does the proposal:
•Limit the ability of consumers to decide from whom they
purchase
•Change the information available to consumers but not
improve their ability to make informed decisions?
•Reduce the mobility of customers by increasing the cost of
changing suppliers