Competition
Competitive markets provide the best means of ensuring that the economy's resources are put to their best use by encouraging enterprise and efficiency, and widening choice.
Where markets work well, they provide strong incentives for good performance - encouraging firms to improve productivity, to reduce prices and to innovate; whilst rewarding consumers with lower prices, higher quality, and wider choice.
By encouraging efficiency, competition in the domestic market - whether among domestic firms alone or between domestic and overseas firms - also contributes to our international competitiveness and economic growth.
However, in any economy, anti-competitive practices and structures can develop which stifle innovation and growth. Timely and effective enforcement is essential to identify them and ensure they are tackled efficiently.
Competition analysis seeks to determine whether existing or proposed agreements or practices have led to or will lead to a loss of competition in markets or abuse of market power and, if so, to identify remedies to rectify the problem.
The Government’s 2011 consultation on competition reform has confirmed that many aspects of the UK’s competition regime continue to be seen as world class.
| The UK competition regime is highly regarded internationally. In Rating Enforcement 2011, the Global Competition Review (GCR) awarded the Competition Commission its highest rating of 5 stars and the Office of Fair Trading 4.5 stars. The merger regime is particularly highly regarded and was assessed by KPMG in its 2007 Peer Review of Competition Policy as being the world’s second best. The World Economic Forum in its 2011-12 Global Competitiveness Report also recently assessed the UK regime as being in joint third place for the effectiveness of anti-monopoly policy. |
However, the consultation also highlighted some significant challenges for how the system in the UK works at present and has made a number of proposals to enhance the regime’s performance. These are set out in the Government’s response (PDF, 591 Kb) published on 15 March 2012.
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Competition authorities
Whilst the Secretary of State for Business, Innovation and Skills sets the overall policy framework for competition, it is regulated by the UK’s independent competition authorities.
There are currently four main competition bodies that are responsible for investigating and enforcing decisions on competition matters in the UK market:
- The Office of Fair Trading (OFT) is the principal competition authority whose responsibility is to enforce competition and make markets work well for the benefit of consumers. The OFT derives most of its powers from the Enterprise Act 2002 and the Competition Act 1998. The OFT investigates mergers and anti-competitive practices in markets and also enforces consumer law – see “Modernisation – Understanding Competition Law”. Large mergers with a European dimension may be covered by the European Community Merger Regulation (ECMR).
- The Competition Commission (CC) conducts in-depth inquiries into mergers, markets and the regulation of certain industries such as utilities and communications. However, the CC only undertakes its inquiries where they have been referred to it by the OFT, one of the sectoral regulators or in exceptional circumstances the Secretary of State.
- The Competition Appeal Tribunal (CAT) is a specialist judicial body whose function is to hear and rule on appeals of decisions made by the competition authorities. The CAT has a cross-disciplinary expertise in law, economics, business, competition and economic regulatory issues.
- The European Commission (Directorate General for Competition) has exclusive powers to act on certain large mergers with a European dimension. It also has powers to investigate anti-competitive practices when trade between members of the European Community, or in some cases the European Economic Area (EEA), is affected. See also: European competition policy.
In April 2014, the Government’s reforms will bring together the best of the OFT and CC into a single Competition and Markets Authority (CMA) to become a world-leading competition authority, advocating competition both at home and abroad. It will have a greater role in ensuring competition in regulated sectors is being addressed, through enhanced cooperation and information sharing between itself and the sector regulators. It will make better use of public resources, and business will benefit from having a single agency to deal with.
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A number of Sectoral Regulators (utility regulators and others) have a specific role in promoting or facilitating competition within their sectors.A number of Sectoral Regulators (utility regulators and others) have a specific role in promoting or facilitating competition within their sectors.
Some of these regulators also have the power to apply the Competition Act 1998 concurrently with the OFT. The regulators with such 'concurrent powers' are:
- Ofgem - in the energy markets
- Ofwat - in the water industry
- Ofcom - in the communications sector
- ORR - for railway services
- CAA - in relation to air traffic services
- Utility Regulator - for gas and electricity in Northern Ireland
- Monitor - for NHS Foundation Trusts. The Health and Social Care Bill 2012 sets out that Monitor will become the sector regulator for health. Its core duty will be to protect and promote patients' interests. It will license providers of NHS services in England and carry out three core functions: regulating prices; enabling integrated care and preventing anti-competitive behaviour; and supporting service continuity. Monitor will also have a continuing role in assessing NHS trusts for foundation trust status, and for ensuring that foundation trusts are financially viable and well-led, in terms of both quality and finances.
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