Predict the Impact on Organisation and Consumers of Government Policy :: Economics

Predict the Impact on Organisation and Consumers of Government Policyon IndustryThe governments industrial policies seek to capture an impact onorganisations and consumers. The government has a wide range ofpolicies effecting three areas- Monopoly- Privatisation- Location of industryMonopoly and Restrictive PracticesMonopoly power may lead to consumers being use for example,prices charged above the true marginal cost of supply - leading toexcess profits being made by suppliers in the commercialize. Monopoly power base also lead to lower quality output of goods as the protectedposition of monopolist means that there result be a privation of incentive toimprove goods. Because of the potential economic welfare loss arisingfrom the exploitation of monopoly power, the Government regulates somemonopolies. Regulators can control annual price increases andintroduce saucily competition into particular industries. In terms ofregulation of monopoly the government attempts to prevent opera tionsthat are against the public interest - so called anti-competitivepractices.Problems occur when the commercialise coordinate in a given industry becomesmonopolistic e.g. if a merger or a take-over causes a firm to supplymore than 25% of the market output (defined as a working monopoly).The Competition Commission investigates mergers. Oligopolies can alsolead to market failure - particularly if there is evidence of scheming behaviour by the dominant businesses within an industry.The Competition CommissionThe Competition is a public body established by the Competition Act1998. at one time known as the Monopolies and Mergers Commission, it cameinto being on 1st April 1999The Competition Commission has two briny roles- Reporting on referrals made by the Director world(a) of Fair Trading, the DTI and the main utility regulators- Hearing appeals against prohibitions under the Competition Act 1998New legislation comes into force from 1st March 2000 and theCompetition Commission wi ll hear appeals against decisions made byregulators. Regulators and DGFT will carry out the prohibitions.Regulators have the power to enforce prohibitions and to impose finesof up to 10% of turnover.Prohibitions - These fall into two main categories Anti-competitiveagreements, which include fixing purchasing and selling prices,limiting production, technical development, investment, sharingmarkets or supply sources and applying different trading conditions toequivalent transactions. Abuse of dominant market position normallywhere a firm has over 40% of the market and imposing unfair purchasingor selling prices.Referrals to the Competition CommissionA last ditch effort if the Director General of Fair Trading cannotremedy the problems. Tends to follow the merger business cycle (verystrong at the trice). Agreement can be reached to rectify theoffending area of conflict- ITV companies were requested to reduce advertising sales contracts