Understanding the Competition Commission

The Competition Commission is a body I'd come across in studying Economics and on the news on numerous occasions before now, but had never been informed of its purpose within the economy. After recent news of the Competition Commission's audit market reforms, I thought it necessary to research the CC's roles.

The Competition Commission (CC) is an independent public body with an aim of ensuring healthy competition between companies in the UK for the ultimate benefit of consumers and the economy. In order to do so, it conducts investigations of great depths into mergers and markets. 

A merger is the combining of two firms on roughly equal terms into one new legal entity. If the merged entities were competitors, the merger is called horizontal integration, if they were supplier or customer of one another, it is called vertical integration. They are referred by the Office of Fair Trading (OFT) to investigate whether there is a realistic prospect that a merger will lead to a substantial lessening of competition. If such a prospect exists, the merger will be referred to the CC (unless the merging party addresses the concerns of the market is sufficient of importance). Once referred to the CC, the Commission can address the concerns by exercising their powers, for example through requiring a company to sell off part of its business or by preventing a merger from going ahead. 

A market is any structure that allows buyers and sellers to exchange any type of goods, services and information. The buyers must have something they can offer in exchange for there to be a potential transaction. The OFT investigate markets for competition problems and if there is a concern that these exist, the market is referred to the CC for in-depth investigation to decide if any feature of the market prevents competition. If features of market harming are found, the CC either introduces remedies (undertakings) itself or recommends actions by others. 

The CC also has functions regarding the major regulated industries, for example the supply of gas, electricity, water, sewerage, rail, air traffic services, airport services, postal services, electronic communications and public health care. Other authorities may refer regulatory matters to the CC, such as disputes concerning proposed price controls.