The Government Policy/Authority On Supervising the Market

Topic: BusinessComparative Analysis
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Last updated: April 21, 2019

The UK government has taken lots of forces on supervising the market, both in policy and departments. With the development of the market, the focus for government supervising regularly moves on to the monopoly related activities nowadays. Hence some related and specific legislations and organizations are issued and formed to fight against the informal and unequal business activities, especially the monopoly affairs. Then with the intervention of EU laws and organizations, the UK original ones were forced to be re-fixed or replaced, in order to better fit into the uniform EU market.

Al though the UK policies and legislations have been changed several times, since they were issued/formed, lots of UK business have been successfully investigated and supervised, such as the supermarket. Generally, the UK have done well on supervising the market running well before, as the market becomes more and more complex, the UK government need to better improve itself to keep the market running and growing on track. Introduction The UK market has been grown over ages; it is now a relatively mature and formal market.There are nearly all kinds of business factors coexisting in this mature economic system, such as, consumers, normal firms, laws, investigators and even monopoly. The monopolies are defined as the dominant firms with a market share over 25 per cent. And similarly, a merger could be referred to the MMC if the combined market share exceeded 25 per cent.

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Also a kind of agreement, which is called as the restrictive trade practices (RP), are being widely used/signed between firms in order to reduce the impact of competition. They are all the potential factors in the current market, which could result the market failure.With these worries, government formed some investigating organizations, such as MMC (the Monopolies and Mergers Commission), and issued some competition laws, in order to protect the interests of consumers and small businesses and also strengthen the dominant firms’ competitiveness and consequently avoid the market failure. Here below we will expain some details of policies and legislations that the government gave out, and a further research on how the legislation and department are dealing with the monopoly affairs. Results and AnalysisCurrently in the, there are two main acts in the field of anti-monopoly legislation, namely the Enterprise Act and the Fair Trading Act. Both of them are commonly used by government during investigating the irregular business activities. For the former, its aim is to ensure that business in the can compete on the ground of no anti-competition practice by marking those behaviors as illegal. In the Chapter 1 and 2 of this act, Anti-competitive practice and abuse of dominant place in the market are defined and the consequent legal action is listed.

For example, any firms fixed their price together in order to get a higher market share will be fined by as much as 10% of their turnover in the if their market share together exceeds 25% in the market they operate. Also, other legal action will be taken if a firm show bias on different customers or add unrelated supplementary items to the contracts resulting over 40% of the market share. As to the Fair Trading Act, it entitle the OFT (OFFICE of Fair Trading) a set of authority to investigate and report as well as review the Anti-competition practice in the market.

First of all, under this act, the OFT are legitimate to require the companies breach the legislation again and again to make an assurance and take them to court if the assurance is also breached. Also, they can initiate any investigation by requiring information formally and informally by requiring information from any party involved. Moreover, they have the power to refer to any organization under investigation to the Competition Commissions so that further legal action will be taken.Lastly, OFT is also required by law to be the source of advice of the Secretary of State. Recently, because of the influences of European Union, the UK laws have been changed a lot. The early PRM Act in 1964, which referred to the Price Maintenance Act, was replaced by the Competition Act in 1998 with the regular consummating of the UK domestic economic system.

Subsequently, under the big impact of the EU approaches, especially the EU competition law, the Competition Act 1998 was being further improved into the Enterprise Act at last year, which is 2002.Under the requirement of European Act, a set of reforms has been carried out, which aimed at higher position of consumers (more active), redefining the business of being bankrupt and rising the competitiveness of business to efficiently and actively avoid insolvency. Under the EU laws’ influence, there have been made lots of changes in the UK legislature and administrating areas. First of all, policy transparency will be increased and the power of decision-making will be dispersed to professional bodies in order to make the British society being more politically democratic.Furthermore, as the winning of Labour Party in the 1997 General Election, more and more criminal laws/punishments on the unequal competition related irregular business activities are legislated or refixed, for instance, it has been listed that a maximum of 5-year imprisonment penalty is the consequent punishment of price-fixing cartel. Nevertheless, government has never stopped doing the opposite to the little dominant companies; from the BP to the BT. Here we may take the market of supermarket in UK as an example.As this market share is gradually being fully taken by small groups of dominant companies, the companies are becoming preferred to choose passive competition and even combine with their rivals in a “legal way”, in order to control over this market.

On the other side, the government is trying its best to prevent this kind of activities even if reset the related laws. In this complex and reflecting business environment, how the governments deal with them, and how the firms take reactions? Here we may take the supermarket, Safeway, as an example.The Safeway is one of the largest supermarkets in Britain, which is now the leading retailer in the British grocery market. With 90,000 employees and about 480 stores in nation wide, its chains attract nearly 8 million consumers per week. At first Safeway was an US owned company named Safeway food stores ltd in California.

The first store formed in Bedford in 1962. After twenty years, the branch companies have expanded to 133, taking large/dominant shares in the UK food retailing market. The Safeway grew sharply in a large extent depending on the good relationship with their suppliers.Because they know the business they are running is the fruit supermarket, which is like the agency between consumer and supplier. The only efficient way to rival with other supermarkets is to get the goods with better quality and cheaper price.

Notably allied suppliers and keep good relationship with them is one of the reasons why they so successful. And until now they’ve never stopped trying to enlarge their scales by attracting more consumers and enforce their competitiveness, in order to get a good position in the market to rival with others.As the UK market share is being whacked up by numbers of worldwide companies, the Safeway has to find some ways to strengthen itself to be better fit into the new round of competition.

Then its dominant place in the market and the relatively good relationship with suppliers become their capital of competition. Also its competitive activities are noticed by the government as the suspicion of monopoly related activities, and subsequently being under investigation of the Competition Commission.Recently in this year, in order to enlarge its company, the Safeway had decided to merge with Morrisons, which is another very big supermarket in UK. Nevertheless, this action attracted the lots of attentions from the Office of Fair Trading (OFT). The OFT believed that the mergers increase competition of company, but meanwhile, the loss of competition between Safeway and Morrisons in some local areas and the loss of competitiveness of such big companies appeared to be substantial.Moreover, the OFT found it difficulty in identifying and allocation the obvious/visible correspondence in business between Morrisons and Safeway.

As a result, the OFT put it into gear, started to investigate the merger affairs between the two dominant companies. As the investigation turned to be deeper and deeper, more and more details information were mastered by the OFT. Later, Safeway decided to accept the advice from the OFT, to stop the merger and all things related to it, no matter how much they would loss.The result as people’s expected, the authorities do not allow the major structural change in current balance of supermarkets, including the possibility of merger from four players into three.

If the great score successes, the new merged business will become not only a strong national supermarket but also becomes a fourth national supermarket, with a market share of 20 percent in a once-shopping. The big threaten is not only to the consumers’ interests, but also to the balance of market competition.In the aim of keeping/building a healthy market, Commission will not welcome this kind of deals. Hence, the merger plan has to be canceled.

Not come singly but in pairs, the Safeway has also been investigated by the UK government in the past. In the year 2000, before an investigative reporting was handed over to the Competition Commission, an issues letter was subsequently sent to 24 supermarket companies, which are including some dominant companies, Such as, Asda, Tesco and Safeway, as part of its monopoly inquiry.With the Inquiry Group’s further consideration, such a letter was sent to the main parties before there were any conclusions being found out. It is said that the Competition Commission started to put into practice its investigation in the name of the 24 companies belongs to either or both two “complex” monopolies: one regarding the co-fixing price of groceries; and the other their relations with suppliers. In fact, the four companies signed some kind of RP contracts with each other, in order to increase the market of groceries’ price in the same time.

Finally they did it successfully without any interventions of government. However their irregular business actions were criticized by the UK government. As the responding to it, the “coalition” began to lower their food selling prices, which measure damaged the farmer’s interests in a large extent, because their abused their dominant market places and powers to cut down the material costs, and consequently affect the UK market competition negatively.As the irregular business activities are more and more serious today, the government supervising organizations, such as the Competition Commission, couldn’t just sitting there any longer. Because of its decisive and steady investigation/intervention, in the following 35 hearings, there were nearly over 200 submissions being received, and the information of nearly 400 supermarket suppliers and 50 local authorities have also been received.

Even though of this, those evidence cannot quite satisfy the CC, the next step of investigation to CC is to hold a hearing, with the firms, Safeway, Tesco and Asda else. However at this stage there was no conclusions has been reached yet. So the hearing would be going on until it came out a conclusion, which could protect the public interests. Conclusion In conclusion, as growing of UK market, rising in business crimes and developing of European Single Market, the UK laws and organizations should be better prepared for the new challenges brought by the development of UK economy.Although both of the laws and departments made by the UK government have limited management and sovereignty authority, a well-operated and healthy market cannot be kept on track without any laws and organizations. The aim of the government to set up such laws and departments has been regularly moved from preventing the expending/enlarging of the irregular business activities, to preventing the happening/symptom of monopoly affairs.

The monopoly affairs will go on and the work of UK organizations to prevent merger and monopoly will also go on.

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