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Monitoring Dominant Firms and Markets

There are many different authorities promoting and maintaining competitive markets.  In the UK the Competition Commission, the Office of Fair Trading, and industry regulators all work to ensure that competition is maintained.  Recently there have been reports in the news of the European Commission also exercising its powers to encourage competition.  The Commission has undertaken a research probe into the market behaviour of computer chip manufacturer Intel.  The presentation of their initial findings suggest that Intel may have misused its dominant position within the market, engaging in anticompetitive practices to hinder the growth of its main competitor AMD (BBC, 27th July 2007).  One of the issues under investigation by the Commission is whether Intel paid manufacturers to either delay or cancel the launch of products that contained AMD technology, as well as charging below the market price for its microprocessors (The Times, 27th July 2007).  If found guilty of the allegations, Intel could be forced to pay up to 10 per cent of its turnover in fines (as much as $3.5 billion).

It is not only the European Commission that has the power to levy fines.  Industry regulators also have significant powers.  For example in June, the water regulator Ofwat, imposed a fine of £8.5 million on water firm United Utilities (BBC, 22nd June 2007).  The fine was imposed because the firm 'repeatedly breached its licence' in failing to 'market check' deals with associate companies, such as installing water meters.  Market checking means a firm assesses the services it uses are the best value for money, so that customers pay no more than necessary.

For large firms, working within the limits of the regulatory bodies that monitor their operations can be complex.  To understand more about this type of working environment, try reading the Times 100 case study about Go-Ahead, one of the UK's leading providers in the fields of bus, rail and aviation support services.

Sources:

Competition Commission

Office of Fair Trading

Office of Rail Regulation

Office of Communications

Ofwat

European Commission

EU outlines Intel 'market abuse' - BBC News, 27 July 2007

Intel faces $3.5bn fine on antitrust claims - Times Online 27 July 2007

United Utilities given £8.5m fine - BBC News, 22 June 2007

The Times 100 Case Study Edition 12 - Go Ahead, Meeting needs in a competitive sector

Suggested Study Questions:

How do the roles of the Competition Commission and the Office of Fair Trading differ?

What is predatory pricing and why is it considered anti-competitive?

Why do governments want to promote competition?

Other than Go-Ahead, what other Times 100 case study companies work under the careful eye of an industry regulator?