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The role that Competition authorities may play in correcting market failures and facilitate competition - Essay Example

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Critically discuss the role that Competition authorities may play in correcting market failures and facilitate competition for a country of your choice. Introduction The business environment of today faces immense pressure from globalization and technological innovation…
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The role that Competition authorities may play in correcting market failures and facilitate competition
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The role that Competition authorities may play in correcting market failures and facilitate competition

Download file to see previous pages... Moreover, with the promulgation of more liberal trade, consumers can now enjoy better deals from various producers as the myriad of local and international firms increasingly compete on the basis of better pricing and more quality. Moreover, as more and more firms enter the market, companies are really forced to innovate in order to serve their market better. Central to this is competition. Basically, the globalization has greatly helped in levelling the trade barriers wherein the location is now hardly a source of competitive advantage. This has also been greatly helped by the leaps and bounds of technology which has facilitated vast improvements in transportation and communication. However, despite of these innovations, locations remain important when industries cluster on these areas. These industries amass in certain areas which can strengthen the various industries within them in order to be more productive and by directing and concentrating innovation as well as the stimulation of the birth of new business ventures in the area (Porter, 1998). Still, central to this endeavour is the competition or more accurately the presence of competition. Chang and Harrington (2003) recognize the importance of the level of competition that can be brought about by firms that are able to innovate greatly and maintain a global presence. Prior to the dawn of globalization, many companies are snugly operating within their realms and cuddled by their governments. However, nowadays, many multinational firms have far reaching capabilities globally which encourages innovation to bring about quality and at the same time bring down costs. Again, all these are only possible if firms can compete freely and fairly. Hence, there are various competition authorities that tries to ensure that competition remain healthy within a country. Section A Competition Authority Among the foremost issue that most competition authorities try to tackle is the problem of antitrust. In other words, although innovation is greatly encouraged in the free market and that growth of companies are generally favourable to the economy, certain firms can amass greater market and control thru mergers and acquisitions that, if left unchecked, could result to a consolidation of the industry to only one major player. In such a scenario, there is an effective destruction of competition which can lead to inefficiencies. There are cases when cartels are formed or the dominant player induces practices that may hurt competition such as predatory pricing. Ginsburg and Wright (2010) relate about two deterrents to such practices which are the traditional and penalty deterrence. In their analysis, it can be gleaned that the force of penalties and regulation play crucially in order to maintain balance in a market and to ensure the health of the competition within that industry. UK and Competition The United Kingdom (UK) remains as one of the most competitive countries in the world except for a slight respite in the past years when the country was reeling from the effects of the Great Recession. Recently though, the country has reclaimed its spot in the top ten along with other European countries. Looking at the list which includes Sweden, Finland, Denmark, Germany and The Netherlands clearly Europe is a center for competitiveness. Although the UK was temporarily ousted from the top ten, the country was able to bounce back fuelled by its strong ...Download file to see next pagesRead More
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