Competition Policy in the United Kingdom - Research Paper Example

2002 ushered in a new era with regard to the methods by which merger and acquisitions are overseen in the United Kingdom. As opposed to being a wholesale change, the new system offered a series of minor adjustments, modifications, and enhancements, not of which were inhibiting factors, but rather better measurements and controls. As is the case with any area that is subjective, differing opinions can and do occur, thus this study has been conceived as a means to determine if that view reflects what has and is occurring.

The free market system that allows market forces to determine prices is the hallmark of capitalism and the foundational tenet of Eugene Fama’s efficient market hypothesis. His theory, along with the laws of supply and demand and other theoretical applications have been the pillars upon with the free market system has been built and operate, With this being the case, these same tenets will serve to equate if the new measures as brought forth under the Enterprise Act 2002 work as well as the system they are designed to enhance.

As a member of the European Union, the United Kingdom is obligated to follow the dictates of policies as set forth by the European Union that in this context is Competition Law (Goyder, 1998). Competition Law in the European Union traces its roots back to the beginning of its formation that was devised after the Second World War as a means to handle the integration of the different economies into the single market framework (Goyder, 1998). As the administrative authority for the member states, the European Union legislative framework sets forth the provisions for competition policy that consists of the following four major rules (Sauter, 1997).

The first represents the prohibiting any type of agreements within, or between member countries, along with firms situated in countries outside of the EU that distort, hinder and or restrict competition in any form under Article 81 EC (Sauter, 1997). Examples of the preceding include, but are not limited to, agreements that represent the fixing of prices as well as the establishment or participation in cartels (Sauter, 1997). The second major provision is represented by companies that are in a dominant market position are obligated to refrain from abusing that position, under Article 81 EC, with regard to actions such as predatory pricing that is aimed at reducing and or eliminating competition (Sauter, 1997).

These rules apply to all firms operating within the jurisdiction of the European Union, regardless of their country of origin, meaning foreign concerns (Sauter, 1997). The topic of competition policy is complex and often driven by various different considerations, including consumer protection, the promotion of competition and the mitigation or prevention of market abuse. This is particularly relevant in the UK, and the wider EU, with Articles 81, 82, 86 and 87 of the Treaty establishing the European Community creating several different requirements for competition policy in the member states to observe.

This can make it difficult for many companies to understand what is and is not likely to be permitted in the UK, particularly when engaging in practices, which can substantially alter the competitive environment in a market, such as mergers or acquisitions.