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Competition Law Toolkit
IV. Benefits of Competition Policy
The proliferation of systems of competition law around the world reflects the growing belief that competitive markets are beneficial for consumer welfare. Competition for this purpose has been described by the Competition Commission in the UK as "a process of rivalry between firms...seeking to win customers' business over time."1
Competition authorities have given very clear statements on the importance of competition policy.
| EUROPEAN UNION |
| "I am convinced that a rigorous application of competition policy is the best way of guaranteeing economic freedom. Economic freedom, within a proper regulatory framework, is a precondition for the development of a free society. Freedom of competition is thus a public freedom. It impacts not only on the economic environment but also on the organization of society at large. It is in this way that competition policy is a "people's" policy. These convictions have been behind my work as Competition Commissioner."
- Mario Monti, the former Commissioner with responsibility for competition policy in the European Union
Competition for Consumers' Benefit , a speech given in Amsterdam on 22 October 2004
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| JAPAN |
"The Antimonopoly Act aims to realize the efficient operation of the Japanese economy by removing obstacles to free and fair competition in the market in ensuring the sound operation of the market mechanism."
"The market mechanism makes firms compete with each other and allows consumers to participate in the operation of the economy through the selection of goods and services in the market, consequently resulting in the effective management of the market economy."
- The Fair Trade Commission of Japan
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| UNITED KINGDOM |
"Competition is good for consumers for the simple reason that it compels producers to offer better deals—lower prices, better quality, new products, and more choice."
"Competition is not an end in itself but a process that advances goals of economic well being, ultimately for consumers."
- Sir John Vickers, the former Chairman of the Office of Fair Trading
Competition is for Consumers , a speech given to the Social Market Foundation
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It is apparent how similar these various statements of the beneficial effects of competition policy are, and that they emanate from jurisdictions throughout the world. A particularly clear statement of the benefits of competition policy will be found in the US Department of Justice's pamphlet, Antitrust Enforcement and the Consumer. Similarly, the European Commission has published a booklet, EU Competition Policy and the Consumer .
The important issue, therefore, is to understand why it is so widely believed that competition can have such a beneficial effect on consumer welfare. To understand this, one must briefly turn to economic theory and consider what would happen in conditions of perfect competition and compare the outcome with what happens under monopoly.
- Benefits of Competition
- Disadvantages of Monopoly
- Summary of Typical Benefits of Competition
- Merger References: Competition Commission Guidelines CC 2, paragraph 1.20.
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