Benefits from competition:some illustrative UK cases

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Davies, Stephen ; Coles, Heather ; Olczak, Matthew ; Pike, Christopher ; Wilson, Christopher (2004)
  • Publisher: Department of trade and industry (DTI)

This study provides a powerful demonstration of the real world impact of increasedcompetition. By presenting six market case studies drawn from a variety of sectors itgives evidence of the type and magnitude of the benefits following marketinterventions to develop competition and free up the operation of these sectors. In discussing the types and form such interventions take, whether competition policy,deregulation or liberalisation, this report explores market conditions before and afterintervention, paying careful attention to both the envisaged benefits and the potentialfor negative side effects. Overall, the evidence suggests these benefits materialised,and in a number of instances proved more sizeable than anticipated. Concerns aboutharmful side effects have proved unfounded, with market stimuli impacting not only onthe price and range of goods available but also acting as a motivating force to productand process innovation. As Professor Davies points out, although active competition policy proves an importantcomponent in the competitive process, it is not sufficient in its own right. In order todeliver greater productivity, of which competition is a key driver, the UK needs a pool of resourceful entrepreneurs able to exploit changing market conditions. In order togive these people the best chance of success the framework conditions need to becorrect with strength in the complementary capabilities of innovation, investment, skillsand enterprise. Ensuring the competition framework is world class is central to the DTI’s strategy. The most recent peer review of the UK competition regime demonstrates that the UK isa strong performer, ranked third in the 2004 study, with the US first and Germanysecond. This study provides further evidence of the important role played by thatframework in delivering tangible benefits to consumers.
  • References (10)

    1. Introduction ......................................Stephen Davies

    2. Retail Opticians ................................Matthew Olczak

    3. International Telephone Calls .........Matthew Olczak

    4. Net Book Agreement .......................Christopher Wilson

    5. Passenger Flights in Europe ...........Heather Coles

    7. Replica Football Kits .......................Matthew Olczak

    8. Summary ..........................................Stephen Davies g n i x i s f s d e it in ic f r K ) p /3 f a 2 o c 0 e i 0 c l -29 lian r o f

    92 In 1998, on average, a club in the English top division made £5.24m from merchandising (Football Task Force, Commercial Issues, 1999, Review of 1998 Annual Accounts by Deliotte & Touche.) For example, Manchester United, one of the biggest clubs in the world in terms of turnover, has become a global brand, and its “commercial activities” account for £40m (27% of turnover) (Manchester United, 2003).

    93 The 'Toongate' affair in 1998 highlights the growing perception of exploitation: tabloid newspapers exposed two Newcastle United directors boasting about large mark-ups on replica kits and suggesting supporters were gullible, (Football Task Force (1999)).

    94 Keynote (2002).

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