As a result of the Neo-Classical understanding of monopoly groups, government control of monopolies began in the 18th century. Monopolies, according to Neo-Classical philosophy, are damaging to economic markets (Bloom and Van Reenen, 2006). Combining two businesses into one minimizes competition while increasing the firm's monopoly strength. Monopolies have complete pricing autonomy and contribute significantly to the misallocation of scarcely distributed resources. Nonetheless, the approach to monopoly regulation has evolved in recent years. Countries now analyse monopolies on an individual basis so as to establish their effects on public interests (Faure and Zhang, 2011). Monopolies are now accepted due to the immense benefits they portray such as economies of scale and export revenues.
With the recent wave of changes in the competition policy, the economic atmosphere of the UK has experienced a dynamic shift in dogma. Clarke and Morgan (2006) cite the 1998 Competition Act that was designed to align the UK market in tandem with that of the EU region. As stipulated in the Act, the government ought to draw its attention away from the overall monopoly policy and focus on the more dominant firms. Hence for a long time, the UK government imposed regulations over the monopolies by virtue of scale under the Fair Trading Act of 1973 (Clarke and Morgan, 2006). Due to the fact that the policy overlooks some of the companies that fail the test of dominance, the government came up with an amendment in the 2002 Enterprise Act shifting the focus from dominant firms to the regulation of anti-competitive behaviour of all monopolies.
Essentially, the competition law of the UK seeks to curtail selfish practices by firms that undermine the entry of other firms into the market (Cornaror et al. 2014). In addition, the policy seeks to reduce overall market dominance by a single conglomerate as well as restrict the process of partaking in and takeovers. Reduced competition in any economic situation is detrimental to the consumers who are left at the mercy of monopolies. In the UK the responsibility of handling competitive policy is placed in the hands of the Competition and Markets Authority (CMA) (Seely 2016 pg. 3). CMA handles all public enquiry and selective regulations concerning the monopolies in the country. It also has a detailed strategy which complies with the provisions of the EU economic policy in Articles 101 and 102 (Seely 2016 pg. 3).
Reforms
Amendments of the Legislature
In the fiscal year of 20176/17, the UK government promised to introduce the “Better Markets Bill” (Seely 2016 pg. 4) that would increase the consumers’ purchasing power as well as enhance the level of competition. Also, the Bill would increase the powers granted upon the authorities to augment the anti-competition regulations. One of the main aims of the Bill is to reduce the level of dominance of monopoly companies and therefore increase the choices available for the consumers. Having open markets in the UK will be advantageous as competition helps small firms to grow and also increases the level of innovation in the business scene (Faure and Zhang, 2011). Moreover, short term competition increases the efficiency because the firms are forced to allocate their resources in a more result-oriented manner. Bloom and Van Reenen (2006) theorized that competition increases the incentives for new firms thus contributes to quality management practices.
Hitherto, there has not been a single policy that unifies the economic enforcement policies in the UK with those stipulated by the EU. However, the goal of both policies has always been consumer protection. Another Bill passed in the UK to this effect is the Enterprise and Regulatory reform Bill (Seely 2016 pg. 9). Research carried out pertaining this Bill sought to quantify the value of competition in regards to consumer savings. Many argued that despite the quantification of market success through these figures, the contribution of competition to growth of the economy is immeasurable. Enterprise Act 2002 brought along a variety of changes shifting the decision making powers from the ministers to the law enforcements agencies (Rodger and MacCulloch 2014). Competition Commission was now given full control over the laws and regulations governing the mergers and monopolies instead of reporting to the Secretary of State as previous laws postulated.
Increased Market Research
Private affiliates like the Department for Business, Innovation and Skills have launched investigative exercises into the regulatory activities of the CMA. These companies seek to assess the effects of the market laws and changes enforced by CMA (Seely, 2016 pg. 10). Other companies carry out research on a global level in an effort to establish the link between competition and employment opportunities. Research efforts assist the government in strategic planning of policies with a foresight of the future. In addition, market research helps determine the weak areas with minimal consumer response (Bloom and Van Reenen, 2006). In this way the government is able to provide remedies and incentives in an effort to promote growth in that specific sector. Overally, the aim of market research is to estimate the current level of growth as well as predict future trends giving the regulators and shareholders a chance to plan proficiently.
In conjunction with the European Commission, the CMA is also conducting surveys to help estimate the effects of their policies on consumer satisfaction. CMA published a research article in 2015 that theorized a link between competitive reinforcement and productivity (Seely 2016 pg. 10). In the paper the company theorized that competition contributes positively towards economic growth and export revenues. Providing evidence- based research on the effects of regulation on growth and expansion of the economic industry acts as a convincing factor (Rodger and MacCulloch 2014). It contributes towards consumer understanding of the essence of competition and importance of having free markets (Faure and Zhang, 2011). It also discourages the formation of mergers and amalgamation of businesses because of the guaranteed promise of potential growth. Surveys like that of the National Audit Office provides shareholders with an insight into the important work carried out by the CMA in regulation of the impact of monopolies in the UK.
Merger Control
Formation of mergers and monopolies is investigated and regulated by the Competition Commission (CC). The main function of the Corporation is to investigate the basis of formation of mergers and the impact of the new company on the existing market situation (Seely 2016 pg. 15). One of the major areas of contention in merger formations and monopolies is public interests. Owing to the fact that mergers and monopolies contribute to price discrimination (Faure and Zhang, 2011), the CC provides a guideline that governs the operation of merged companies. The Commission carries out an annual enquiry which sets out to investigate whether the existing monopolies distort or restrict competition in any way. In response to this the key players in the market align their activities with the regulations provided for by the economic policy. In cases where the mergers do not conform to the law, the Secretary of State undertakes an assessment of the merger and recommends a way forward. By exercising control over the formation of mergers, the UK government is able to ensure the fulfilment of public interest and warranty the growth of the industry (Rodger and MacCulloch 2014).
Promotion of Competition
Another aspect of regulation enforced by the UK government is the legal prohibition of activities by organizations such as cartels that prevent the existence of competition. The Office of Fair Trading (OFT) is particularly responsible for the enforcement of such governing laws. OFT has the support of the judiciary and particularly the Competition Appeal Tribunal (CAT) which is responsible for handling appeals and cases concerning the economic regulation (Steely 2016 pg. 12). There also exists a similar body in the EU which is tasked with preventing market dominance therefore facilitate trade between the member states. OFT also serves as an advisory to the Secretary of State on matters that require specific attention and the steps that should be taken to rectify economic instability. Existence of such bodies ensures that all firms get equal opportunities in the market situation hence encourage competition amongst key industry players (Cornaror et al. 2014).
Conclusion
Since the inception of the Neo-Classical theory, the economic scene of the UK has experienced tremendous growth. The country is now more accepting of monopolies and is able to effectively govern their market shares. Regulation is important in any economic setting because it ensures fair opportunities of growth to all the key players (Cornaror et al. 2014). By restricting the impact of monopolies, the UK government promotes entry of new and innovative companies into their markets. It also ensures the consumers retain control and have choices pertaining to the array of services and goods offered. Small businesses are also given a chance to expand and claim their market share. Recent developments in the Competitive Policy in both the UK and the EU have contributed to the changes in the business atmosphere (Rodger and MacCulloch 2014). Steady and authoritative regulation of monopolies has encouraged investments into the UK thus increasing the revenue of the country. Recent policy changes in the UK have a positive impact on the economy of the country.
References
Bloom, N and Van Reenen, J. (2006). Management Practices, Work-Life Balance and Productivity: A Review of Some Recent Evidence. Oxford Review of Economic Policy, Vol 22.
Cornaror, G. et al. (2014). Competition Policy in Europe and North America: Economic Issues and Institutions. Taylor & Francis.
Faure, M., Zhang, X. (Eds). (2011). Competition Policy and Regulation: Recent Developments in China, the US and Europe. Belgium. Edward Elgar Publishing.
Rodger, B., MacCulloch, A. (2014). Competition Law and Policy in the UK. Revised Edition. Lancaster. Routledge.
Seely, A. (2016). The UK Competition Regime. Briefing Paper Number 04814. The House of Commons Library.
