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Evaluation of competition policy

The Competition Act (1998) and Enterprise Act (2002) gave UK regulators more power to act against abuses of monopoly power.

However, UK competition policy can be criticised as follows:

  • Critics argue that only a few mergers are fully investigated each year. Indeed, in the years immediately following the passing of the Enterprise Act in 2002,  not a single major UK cartel was investigated by the OFT. However, since 2008, the OFT has been more active in its investigations.

See article from the Daily Telegraph (April 2008).

  • Despite the threat of heavy fines, and new powers for regulators - including the ability to undertake surveillance - covert collusion is difficult to prove. Furthermore, tacit collusion is even more difficult to prove.

  • Critics also point to the problem of regulatory capture, where, it is argued, the regulator takes sides with the firm or industry it is supposed to be regulating.

  • There is also a concern that it is often too easy to find loopholes in the legislation, such as avoiding regulations affecting one market by moving into an adjacent market. Indeed, a substantial criticism of legislation is that single markets are inadequately defined. This was in response to an OFT ruling in 2004 that allowed Tesco to purchase Adminstore (the owners of Cullens, Europa and Harts) on the grounds that convenience stores are a separate market to grocery stores. This gave Tesco 6% of the convenience food market as well as 26% of the grocery market. While Tesco argued that the two markets are quite distinct, critics, like the Forum for Private Business, argued that the markets are almost indistinguishable and that Tesco should not have been allowed to enter the convenience food market.