Investigating competition policy

This is a classroom activity which uses the article 'Economic Policy for Competition and Consumers' by John Vickers, Director General of Fair Trading. This article appeared in the last issue of the journal, Summer 2001. Internet access is highly desirable for this activity, although it is possible without.

Teachers who would like a copy of this activity emailed as an attached file, so they can adapt it to suit their students' needs, should contact the author direct details on page 1 (Editorial Panel - Reviews).

PART 1

INVESTIGATING A CASE

1

You are going to investigate either a merger which has been referred to the Competition Commission, or a cartel or other anti-- competitive practice which has been scrutinised by the OFT. You will be working in groups of three or four. Within your group, you should make sure that each of you investigates a different situation. Within the class, make sure that at least two people are looking at CD prices.

If you are not sure what to do, consider Microsoft, or Interbrew or banks and small businesses or DVD prices. All these have been in the news lately. Or go to the OFT website -- see advice below.

Or you can use Google to get any of the newspaper websites. Try FT and put CDs into the search engine when you get there.

2

When you have explored the situation you are investigating, write up how the merger or the anti-competitive practice is (or is likely to be found) against the public interest, and why. If the OFT or CC investigation is complete, what was the outcome?

3

Tell the other members of your group what you have found out. What differences and what similarities are there in your case studies?

PART 2

LINKING UP WITH THE THEORY

1. First, read the article by John Vickers, Director General of Fair Trading.

2. As a group, make a list of all the potential anti-competitive practices you can think of.

3. On your own, work out which of the economic principles outlined in the article are relevant to the case you are working on. You should also use your textbook to review the economic theory underlying competition policy, to see what is relevant. Use the arguments in the article to help you apply the relevant theory to your chosen case. Explain what is happening, using the theory to highlight the problems. If you find this instruction difficult, get some clues from your teacher.

4. Turn your findings into a short report for your group. Show how the firm(s) in question may be likely to try to exploit customers, and why this is a problem.

PART 3 CD PRICES

We have known for some time that CDs are available in the rest of the EU and in the US at prices lower than those we pay in the UK. In February 2001, the OFT said:

'In order to get cheaper CDs, retailers have been importing them from European wholesalers. We are looking at how and why this is happening and whether companies are putting pressure on retailers to use British wholesalers instead.'

The students who have investigated CD prices should share their findings with the whole class. In your groups, discuss what action the OFT should take on this issue. If by the time you are doing this, you know that the OFT has reported its findings to the press, comment on the findings, discuss whether you agree with them or not and give reasons for your conclusions.

Nancy Wall

Nuffield Economics and Business Project

Copyright Economics and Business Education Association Autumn 2001
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