Competition policy

Competition policy is an integral part of government’s economic policy which aims to promote competition and ensure effective functioning of market economies.
It is established to prevent and reduce the occurrences of anti-competitive behaviour, such as monopoly and oligopoly practices.

The main objectives involve promoting efficiency, innovation, and improving consumer welfare.
It also aims to achieve economic justice by ensuring that businesses compete on a level playing field.
The ultimate aim is to improve the allocative, productive and dynamic efficiency in markets which leads to higher economic welfare.

Competition policy employs various regulatory measures including: antitrust laws, merger control, and market liberalisation.
Antitrust laws deal with anti-competitive agreements and abuse of dominant position, ensuring businesses don’t engage in price-fixing, cartels or create barriers to entry.
Merger control involves scrutiny of potential mergers and acquisitions to prevent a significant reduction in competition.
Market liberalisation encourages open and fair competition by reducing regulation and promoting competition in traditionally monopolistic industries.

Competition policy is enforced by competition authorities who are responsible for the implementation of the policy.
Authorities have the ability to investigate, penalise and dictate changes in business practices when firms are found guilty of anti-competitive practices.
They also advise governments on competition impacts of policy and legislative proposals.

Effective competition policy leads to higher market efficiency, lower prices, enhances product quality and choice for consumers thereby increasing overall societal welfare.
It encourages innovation, as firms strive to outperform their competitors, leading to technological advancement and growth.
However, it may also potentially hinder large scale production and prevent firms from achieving substantial cost savings. Hence, striking the right balance is crucial.

The effectiveness of competition policy depends on the strength of enforcement and the prevalence of anti-competitive practices in the economy.
Cost of enforcement and unforeseen impacts on businesses also serve as key evaluative points for the success of competition policies.
Critics also point out that excessive regulation can sometimes stifle entrepreneurial risk-taking and reduce incentives for innovation and growth.