| What is the Intention of the Government when it Intervenes in the Market? | -To Protect the Interests of Consumers by Promoting Competition and allowing a more Efficient Market. This can be achieved via Competition Policy |
| Why could Concentrated Markets where Monopoly Power is Present, could cause Market Failure | -Monopolies Existing can Drive the price Above the Market Equilibrium, meaning a Misallocation of Resources + Deadweight Welfare Loss |
| What does the European Commission and UK Competition and Markets Authority care for? | -Looking out for Unfair Monopolistic Competition such as:
-Mergers: Monitoring them to Prevent an Unbeneficial effect on Efficiency and consumers, or giving them too much Market Share (25%) making it a Monopoly. This would be Harmful
-Agreements: Involves Price Fixing, Splitting markets, or Limiting Production. This is Anti-Competitive and thus Unfair to Consumers
-Opening Markets: When Government-controlled Markets are Opened to Competition. To ensure a Private Monopoly doesn't Dominate
-Financial Support (EC) Governments from one EU Nation giving Support to Firms in a Market, may give them an Unfair Advantage in other EU Nations in that Market
-Blocking: EC and CMA can Block Mergers + Impose Fines on Firms that have been Anti-Competitive |
| What Markets would have their own Regulating Bodies? | -Common in Monopolistic or Oligopolistic Markets
-In the UK, you have OFWAT for the Water Industry. OFCOM for the Communication Industry. OFGEM for the Gas and Electricity Markets
-They can Regulate Prices, Product Safety and allow Competition |
| Why is Information Critical for Competition Policy? | -The European Commission and the CMA can only do so much. They need to Assess whether the Market is Unfair to the Consumer based on the Information they have
-Had it been Reliable, it could Intervene and Improve Efficiency, leading to Greater Allocation of Resources + Fairness. If not, it can allow Government Failure to Erupt |
| How can Privatisation lead to Competition in a Public Monopoly? | -Privatising a Public Monopoly and Opening it to Competition forces a Response to Market Signals.
-There must Additionally be a way to ensure the Public Monopoly doesn't become a Private Monopoly, so Deregulation may need to be Coupled in. |
| Why would Governments use Price Caps, and what are the 2 Types? | -Price Caps are a form of Regulation, and they put a Maximum or Minimum
-RPI-X: Firms make Real Price Cuts. RPI is Inflation and X is Efficiency Improvements the Government Expects. (THE - IS A MINUS)
-RPI-X+K: Seen in the Water Industry, K is the Amount of Investment Firms need to make to Achieve Efficiency Improvements. Therefore, the Firm can make Higher Prices |
| What are the Benefits of Price Caps? | -Limiting the Price encourages a more Fairer Market for Consumers
-Incentive to Firms to Boost Efficiency (Cause they get more Profit) and this Benefits consumers more |
| What is a Windfall Tax? | -This is a Tax on Profits or a Regulation on Profits. The Government will Tax those Profits at an Excessive Rate. This can deter Monopoly Power, but also Reduce Incentive to Boost Efficiency |
| What is the Payment Protection Insurance? (PPI) | -PPI is Insurance that can Repay Debt should the Borrower be Unable to do so. The UK had little Competition in the PPI Market, Rejected Claims, and Selling's of Unnecessary Covers
-CMA dished out Requirements for Firms in the PPI Market, like Providing Information about the Right to Cancel and Costs.
-This was not to allow Mis-Selling and make Consumers more Rational with their Choice
-Also it has Increased Competition, and the Successful Reclaims of Mis-Sold Insurance have Rose |
| What is the Mobile Phone Roaming Charges | -Roaming Charges are Charges for using Data Abroad. The European Commission has monitored CHanges since 2007 and noted a Lack of Competition Drove up High Charges
-The European Commission introduced Price Caps to Reduce Data Roaming Charges
-Telecommunications Providers in the Member States thus should Comply with Price Caps. This led to Firms actually Driving the Price down due to competition |
