Competition & Market Authority

• What factors make the success of a cartel more likely?

  Few firms working together
• Why is it easier for cartels to agree on prices when firms produce similar products?

  Similar costs make price agreements easier
• How do weak competition authorities affect cartel success?

  They allow for more collusion and corruption
• What is regulatory capture in the context of cartels?

  Authorities become too friendly with firms
• Why are significant barriers to entry important for a cartel's success?

  They prevent new entrants from disrupting it
• What must all major producers do for a cartel to succeed?

  All major producers must be members
• Why is it important for colluding firms to be careful about a paper trail?

  A paper trail can expose their collusion
• What does it mean if the incentive to cheat in a cartel is low?

  Firms are less likely to break agreements
• What must not be available for a cartel to succeed?

  No new substitutes for the product
• Why is a cartel less likely to succeed in the long run?

  Technological advancements produce substitutes
• What does the magnitude of the incentive to cheat depend on?

  Potential profit gained from cheating
• What does the CMA offer firms that admit to colluding?

  Lower punishment for cooperation
• How do barriers to entry affect new firms in a cartel's market?

  They prevent new firms from entering the market
• What is the role of the Competition and Markets Authority (CMA)?

  • Strengthen business competition
  • Reduce anti-competitive behavior
  • Investigate mergers and collusion
  • Protect consumer and firm interests
  • Encourage regulatory body actions

  
• What happens to all mergers as standard according to the CMA?

  They enter phase 1 investigation
• What does phase 2 of the CMA investigation involve?

  A more thorough investigation of impacts
• What are the CMA's remedies after completing an investigation?

  Allow, conditionally allow, or prohibit merger
• How does the CMA assess mergers?

  On a case-by-case basis for impacts
• What are the impacts of government intervention on markets?

  • Prices: Can stabilize or increase
  • Profit: May reduce for firms
  • Efficiency: Can improve or hinder
  • Quality: May enhance or decrease
  • Choice: Can limit or expand options