Competition and Market Authority

• How many firms are typically involved in a cartel?

  A few firms
• Why is it easier for firms in a cartel to agree on prices?

  They produce similar products with similar costs
• What factors contribute to weak competition authorities in a cartel situation?

  Bribery and corruption are prominent
• What is regulatory capture in the context of competition authorities?

  Authorities become 'too friendly' with firms
• What is a significant barrier to entry for new firms in a cartel?

  Significant barriers to entry exist
• Why must all major producers be members of a cartel for it to succeed?

  To maintain control over the market
• What precaution do colluding firms take regarding their agreements?

  They ensure there is no paper trail
• Why is the incentive to cheat low in a cartel?

  Cheating can lead to severe penalties
• What must not be available for a cartel to succeed?

  No new substitutes for the product
• How does technological advancement affect a cartel's long-term success?

  It produces substitutes for the cartel's product
• What does the success of a cartel depend on regarding cheating incentives?

  Magnitude of the incentive to cheat
• What role does the CMA play in cartel investigations?

  They offer lower punishment for cooperating firms
• What is the impact of barriers to entry on a cartel's success?

  They prevent new firms from entering the market
• What are the impacts of government intervention on markets?

  • Prices
  • Profit
  • Efficiency
  • Quality
  • Choice
• What is the role of the Competition and Markets Authority (CMA)?

  Strengthening business competition and reducing anti-competitive behavior
• What does the CMA investigate?

  Mergers and anti-competitive behavior
• What is one of the CMA's goals?

  Protect the interests of consumers and firms
• What happens during the phase 1 investigation of mergers by the CMA?

  All mergers enter this phase as standard
• What can happen after a phase 2 investigation by the CMA?

  Merger can be allowed, conditioned, or prohibited
• How does the CMA assess mergers?

  On a case-by-case basis regarding impacts
• What are some remedies the CMA can impose after an investigation?

  Allow, condition, or prohibit the merger
• Is the CMA anti-monopoly?

  No, they assess each scenario individually
• What are the CMA's responsibilities regarding cartels?

  • Investigate colluding cartels
  • Bring criminal proceedings against them
  • Address bid rigging, price fixing, and market sharing
  • Encourage regulatory bodies to use their powers