Competition Commission

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Competition Commission (CC)

a regulatory body established by the COMPETITION ACT 1998 which was originally set up in 1948 as the Monopolies Commission (1948-65), then the Monopolies and Mergers Commission (1965-98), which is responsible for the implementation of UK COMPETITION POLICY. The basic task of the Commission is to investigate and report on cases of MONOPOLY/market dominance, MERGER/ TAKEOVER, and ANTICOMPETITIVE PRACTICES referred to it by the OFFICE OF FAIR TRADING (OFT) to determine whether or not they unduly remove or restrict competition, thus producing harmful economic effects (ie. economic results which operate against the ‘public interest’). The Commission is also required by the OFT to investigate cases of ‘illegal’ collusion between suppliers ie. cases where the OFT has good reason to suspect that an ANTI-COMPETITIVE AGREEMENT/RESTRICTIVE TRADE AGREEMENT prohibited by the Competition Act, 1998 is continuing to be operated ‘in secret’. (This task was formerly undertaken by the RESTRICTIVE PRACTICES COURT).

Under UK COMPETITION LAW, monopoly/ market dominance is defined as a situation where at least 40% of a reference good or service is supplied by one firm or a number of suppliers who restrict competition between themselves (CONCERTED PRACTICE OR COMPLEX MONOPOLY situation). Mergers and takeovers fall within the scope of the legislation where the market share of the combined business exceeds 25% of the reference good or service or where the value of assets being merged or taken over exceeds £70 million. Anti-competitive practices are those which distort, restrict or eliminate competition in a market.

Cases referred to the Competition Commission are evaluated nowadays primarily in terms of whether or not the actions of suppliers' (MARKET CONDUCT) or changes in the structure of the market (MARKET STRUCTURE) are detrimental to the potency of competition in the market and hence prejudicial to the interests of consumers and other suppliers, (the so-called ‘public interest’ criterion found in earlier legislation). In cases of monopoly/ market dominance the Commission scrutinizes the actions of dominant firms for evidence of the ‘abuse’ of market power, and invariably condemns predatory pricing policies which result in excessive profits. Practices such as EXCLUSIVE DEALING, AGGREGATED REBATES, TIE-IN SALES and FULL-LINE FORCING whose main effect is to restrict competition have been invariably condemned by the Commission, especially when used by a dominant firm to erect barriers to entry and undermine the market positions of smaller rivals. In merger and takeover cases, again the emphasis is on competitive impact. A merger or takeover involving the leading firms who already possess large market shares is likely to be considered detrimental. (See MARKET CONCENTRATION).

In all cases the Commission has powers only of recommendation. It can recommend, for example, price cuts to remove monopoly profits, the discontinuance of offending practices and the prohibition of anti-competitive mergers, but it is up to the Office of Fair Trading to implement the recommendations, or not, as it sees fit.

Competition Commission (CC)

a regulatory body established by the COMPETITION ACT 1998 that was originally set up in 1948 as the Monopolies Commission (1948–65), then the Monopolies and Mergers Commission (1965–98) and that is responsible for the implementation of UK COMPETITION POLICY. The basic task of the Commission is to investigate and report on cases of MONOPOLY/MARKET DOMINANCE, MERGER/TAKEOVER and ANTI-COMPETITIVE PRACTICES referred to it by the OFFICE OF FAIR TRADING (OFT) to determine whether or not they unduly remove or restrict competition, thus producing harmful economic effects (i.e. economic results that operate against the ‘public interest’). The Commission is also required by the OFT to investigate cases of ‘illegal’ collusion between suppliers, i.e. cases where the OFT has good reason to suspect that an ANTICOMPETITIVE AGREEMENT/RESTRICTIVE TRADE AGREEMENT prohibited by the Competition Act 1998 is continuing to be operated ‘in secret’. (This task was formerly undertaken by the RESTRICTIVE PRACTICES COURT.)

Under UK COMPETITION LAW, monopoly/ market dominance is defined as a situation where at least 40% of a reference good or service is supplied by one firm or a number of suppliers who restrict competition between themselves (CONCERTED PRACTICE or COMPLEX MONOPOLY situation). Mergers and takeovers fall within the scope of the legislation where the market share of the combined business exceeds 25% of the reference good or service or where the value of assets being merged or taken over exceeds £70 million. Anti-competitive practices are those that distort, restrict or eliminate competition in a market.

Cases referred to the Competition Commission are evaluated nowadays primarily in terms of whether or not the actions of suppliers (MARKET CONDUCT) or changes in the structure of the market (MARKET STRUCTURE) are detrimental to the potency of competition in the market and hence prejudicial to the interests of consumers and other suppliers (the so-called ‘public interest’ criterion found in earlier legislation). In cases of monopoly/market dominance, the Commission scrutinizes the actions of dominant firms for evidence of the ‘abuse’ of market power and invariably condemns predatory pricing policies that result in excessive profits. Practices such as EXCLUSIVE DEALING, AGGREGATED REBATES, TIE-IN SALES and FULL-LINE FORCING, whose main effect is to restrict competition, have been invariably condemned by the Commission, especially when used by a dominant firm to erect BARRIERS TO ENTRY and to undermine the market positions of smaller rivals. A merger or takeover involving the leading firms who already possess large market shares is likely to be considered detrimental. (See MARKET CONCENTRATION.)

In all cases, the Commission has powers only of recommendation. It can recommend, for example, price cuts to remove monopoly profits, the discontinuance of offending practices and the prohibition of anticompetitive mergers, but it is up to the Office of Fair Trading to implement the recommendations, or not, as it sees fit.