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Merger 25%

Merger
A prospective merger may be referred to the Competition and Markets Authority for investigation if a larger company will gain more than 25% market share.
Their investigations may take several months to complete during which time the merger is put on hold. Thus giving the target company valuable time to organise its defense. The acquirer may abandon its bid as it may not wish to become involved in a time consuming Competition Commission investigation. 、

Restrictive practices
Some countries have legislation which deals with restrictive practices that distort, restrict or prevent competition.
Examples:

price-fixing agreements : agreements with direct competitors resulting in them colluding to the disadvantage of the consumer
predatory pricing :The abuse of dominant position offences, charging low prices to unfairly destroy competition.


Deregulation
Main aim is to introduce more competition
Removal or weakening of statutory regulation of free market activity.
Allows
free market forces more scope to determine the outcome.

Benefits:
Improved incentives for cost efficiency:
eg .greater competition
compels managers to try harder to keep down cost.
Improved allocative efficiency
eg. competition keeps down prices closer to marginal cost, and firms therefore produce closer to the socially
optimal output level.


Privatisation
It is a policy of private enterprise into industries which were previously state-owned or state-operated.
Three types:
Deregulation of industries, to allow private firms to compete against state-owned businesses
eg. Bus and coach services, postal services
Contracting out work to private firms which were previously done by government employees
eg. Refuse collection, hospital laundry work
Transferring the ownership of assets from the state to private shareholders.


Advantages:
Increase competition, to improve allocative efficiency
Make industry more cost-conscious
shareholders as owners and under scrutiny from stock market investors
Provide immediate source of money for government
Reduces bureaucratic and political meddling
Wider share ownership


Disadvantages:
State-owned industries are more likely to respond to public interest
Encourage private competition may cause potential monopoly operation

 



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