Purpose of the Competition Law - Essay Example

Competition Law Introduction Competition law is enacted to regulate anticompetitive conduct by companies. The procedure of regulation encourages fair competition, restricts unfair competition practices and promotes a competition environment, which is equitable. In Russia and China, competition law is known as anti-monopoly law. In the United States, it is known as antitrust law. The implementation of competition law is primarily through private and public enforcement. The pivotal purpose of the competition law is to maintain competition and provide remedy for the breakdown of free market system. The important objectives of the practice of competition law are to ensure the entrepreneurs by providing the opportunity to compete in the market economy and protect the interest of the consumer welfare. This essay will discuss the purpose of competition law. Discussion Competition law is a law that focuses on the control of anti-competitive agreements, monopolies and mergers between organizations. This area of legal firmament also included cartels (LSE 1). Restrictive business practices can often lead to market failures. The failure in the market can be dealt by the competition law. There are several kinds of restrictive business practices that include abuse of dominance, cartelization, tie-in sales, predatory pricing, re-sale price maintenance etc. Before discussing the purpose of the competition law, it is vital to note the origin and history of the law. In the late 19th century and early 20th century, the competition law emerged. The competition law was first enacted in the United States. The Sherman Act of 1890 is the first Federal Statute. This act was enacted to tackle monopolies and oligopolistic cartels. In the wake of Industrial Revolution, the large trusts were formed. This act emerged against the predations and supremacy of the huge trusts. The three major elements of modern competition law are merger control, anti-competitive agreements and abuse of dominance. Other important United States legislations were Hart-Scott-Rodino Act, the Clayton Act, the Robison-Patman Act and the Federal Trade Commission Act. The proliferation of competition law has not been only in North America and Europe but also around the globe. After the enactment, competition law became one of the crucial pillars of a market economy. The main purpose of the law is to maintain market competition and improve economic efficiency. It can be regarded as the force that drives companies to improve their efficiency. After enhancing the efficiency, it drives companies to pass its benefits to the consumers. There is also a specific goal of competition law which is to prevent the distortion of the competitive process done by economic giants. The prevention of distortion can be done through unilateral action or agreements with other companies. This process enables to nullify the cause of distortion and exclude the potential competitors. The implementation of competition law can help to control agreements among the competing enterprises. The emergence of economic giants has affected the growth of local firms. The humongous growth rate of giant firm can nullify the competition by removing the competitive process. The control of agreement can be on price or other aspects which can distort the competitive course. Agreement can be vertical and horizontal agreement. Vertical agreement can be done between firms but at different levels. The agreement is done on distribution process level or manufacturing process level. Example of vertical agreement is an agreement between wholesaler and a manufacturer. This can help to reduce the harm that is caused due to competition in the market. The agreement with other firms can be done under certain circumstances. These circumstances are most likely to be existed in emergent economies. Horizontal agreement can be done among the competing firms. This can be on prices of commodity, launch of new products or any other aspects that cannot harm the competition. Canada Competition Law In the year 1889, the Canadian competition law was enacted. This process of enactment occurred before the United States Sherman Act. This is the example of the purpose of competitive law in different. Although, the pivotal purpose of the law is to promote efficiency in the economy. After passing the competition act, the main intent of the parliament is to promote effective economic efficiency and encourage. This can eventually benefits consumers. The position of Canada on world markets can be enhanced by the application of competition law. The main purpose of the parliament is to promote adaptability of the economy of Canada, providing consumers products of their own choices, providing competitive prices products, ensuring that every small firm in Canada has opportunity to participate for the betterment of the economy. Its other purpose is to recognize the role of Canada in foreign competition. Every country requires an opportunity to enhance the economy by participating in the world markets. The participation can maintain competitive economic advantage in future. The Competition Bureau is responsible for the enforcement of the competition act. In every efficient working firm, competition is the key element. The benefits of the introduction of competition law are huge. It encourages enterprise to enhance efficiency and innovation. The purpose of the law is to contribute to the national competitiveness. The enhancement of the competitive process can benefit consumers. Competitive law ensures that consumers buy the goods at best possible prices and fell the benefits of the competitive process. This law encourages service providers and manufacturers to optimize the allocation of the resources. This process of optimization can enhance the national economy. Service providers and manufacturers are encouraged to respond to the needs of the customers. Every customer has their own need and style. Therefore it is vital for every enterprise to innovate and venture. The taste and need of the customers are constantly evolving. Enterprise has to keep pace with the needs of shifting consumer interest. Company and industry has to identify the global market trends and issues that can affect the interest of consumers. The law encourages company and firms to improve continuously. This process can not only benefit firm but also consumers. More simply it can help to reduce the waste resources or capital. Company can be more circumspect to waste resources. The amount of cost paid for the same goods and service would be reduced. The reduction of waste can eventually lead to the upsurge of profit. United Kingdom Competition law The competition law of United Kingdom is quite flexible. Dominating firm has created an adverse effect on the United Kingdom economy. The competition law is enforced by the European Union to deal with the problem. Like all the aim of competitive law, the purpose of law in the United Kingdom is to include control of cartels, restriction of competition between business rivalries, restrict free trading, banning anti-competitive practices and supervising the mergers and acquisitions. The agreements and practices that lead to the competition are prohibited. Free trading is the policy in which imports or exports is not prohibited by the government. Small firms can be hugely affected due to this process. The purpose of the law is to limit free trading that would benefit other smaller firms to sustain in the gigantic competitive market. The firms that are holding dominant position are banned for these practices. This purpose helps to control the competitive practices implemented by the dominant firms. The practices can be controlled by refusal of deals, tying price, predatory pricing etc. the introduction of joint venture can enable large companies to tie up with small companies. The other purpose is to supervise the transactions of large corporations. All threatened transactions are prohibited. Other than the prohibition it can also be offered to divest portion of the merged firms or access to facilities. This purpose of the competition law can help other businesses to compete. There are four Acts that were enforced by the Parliament. This Act can help to deal with several aspects. In the year 1973, Fair Trading Act was enforced. The purpose of this competition act is to deal with the mergers of monopoly power. In 1980, Competition Act was enforced. The main purpose of the act is to deal with the anti-competitive practices (Rodger 118). In1976, Restrictive Trade Practices Act was enforced. This act restricts other companies to compete freely. In 1976, Resale prices Act was applied by the European Union. This act deals with the reduction of the prices of goods that are sold to the customers. The main attempt of the law is to impose minimum prices on the goods. Conclusion It can be concluded that the primary purpose of the act is to enhance the economic efficiency. Competition law drives companies to be efficient and pass the benefits of the process on to the customers. This process can benefit consumers to enjoy improved product quality, lower prices and increased amount of choices. Sometimes, competition law can include several provisions. The inclusion of prohibition is due to unfair business practices and consumer protection. The pivotal focus of the prevention is to reserve fair competition in the market. Dominant firms can harm the competition unilaterally. The purpose of the law is to use the advantage of dominant firms to block challenges faced by the potential entrants. The reduction of merger can help to lessen the number of competitors. The restriction of unfair competition can contribute to the economic and social development of the country. Works Cited LSE. LL200: Competition Law and Policy: Controlling Private Power. London: LSE Summer School, 2014. Print. Rodger, Barry. Competition Law. London: Cavendish Publishing, 2001. Print. Read More