Market Studies and Competition - Daniel Gordon - Senior Director, Markets, CMA UK

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This presentation by Daniel Gordon, Senior Director at the Competition & Markets Authority (CMA) of United Kingdom, was made during the Workshop on market studies selection and prioritisation of sectors and industries held on 9 March 2017 at the OECD Headquarters. More papers and presentations on the topic can be found out at http://www.oecd.org/daf/competition/market-studies-workshop-on-selection-prioritisation-of-sectors-industries.htm

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  • 1. Achieving the objectives of market studies: impact on case selection OECD Workshop 9 March 2017 Daniel Gordon Senior Director, Markets CMA 1
  • 2. Give a man a bow and arrow and tell him “Shoot!” … …..his response will be “At what?” 2
  • 3. Policy aims of UK markets framework “ The importance of competition in an increasingly innovative and globalised economy is clear. Vigorous competition between firms is the lifeblood of strong and effective markets. Competition helps consumers get a good deal. It encourages firms to innovate by reducing slack, putting downward pressure on costs and providing incentives for the efficient organisation of production. As such, competition is a central driver of productivity growth in the economy, and hence the UK’s industrial competitiveness.” Productivity and Enterprise White Paper, 2001 (emphasis added) 3
  • 4. Implications ● “Proactive” competition policy ● Identification of “problem markets” ● Holistic assessment ● Explicitly deregulatory ● Advocacy ● Independence 4
  • 5. Market regime tools ● Call for information: light touch investigation where there is a preliminary concern ● Market studies: examinations into the causes of why particular markets may not be working well, taking an overview of regulatory and other economic drivers and patterns of consumer and business behaviour ● Market investigations: more detailed examinations into whether there is an Adverse Effect on Competition in the market(s) for the goods or services referred. If so, the CMA must decide what remedial action, if any, is appropriate - market investigations give the CMA power to impose remedies, both structural and behavioural 5
  • 6. CMA’s use of market studies 6 ● A flexible tool to explore whether markets work well for consumers ● Flexible in terms of: ● Themes/Issues covered ● Outcomes ● Scale ● Resourcing
  • 7. Market studies take a range of forms 7 Strategic studies Longer & larger studies Shorter studies Led to enforcement MIR and significant reform Recommendations for change Remote Communities – aimed to understand responsibility for frequent concerns raised by such communities Advertising of Prices – research into advertising and pricing to determine which practices may mislead consumers and prioritise where to take action Personal Current Accounts – included analysis of bank data and customer surveys including psychological research . Significant recommendations and follow-up Pharmaceutical Price Regulation Scheme – proposed a value-based pricing alternative to current scheme. Recommendations gradually taken forward over recent years Homebuilding – included surveys, analysis of land-banks, planning permissions and carried out case studies . Sector found to be broadly competitive Quick House Sales – launched due to concerns about vulnerable consumers. Study led to consumer enforcement and undertakings being given by three firms BAA Airports – A market study of BAA’s airports led to a reference to the Competition Commission. Sale & Rent-back – a quick study of a growing sector which recommended statutory regulation Medicines Distribution – examined changes to distributing medicines following significant volume of complaints. Recommended regulatory change Outdoor Advertising – study prompted by concentration in the sector. Led to competition enforcement action on media owners’ contracts with local authorities Payment Protection Insurance - Super- complaint, market study led to market investigation and subsequent action. Defined Contribution Workplace Pensions - agreement secured from Pensions Regulator at the time of conclusion of the study for reforms to the sector 7
  • 8. Waste management Pensions Car hire Infrastructure ownership Airports Range of sectors examined since 2002 8 Airport surface access Housebuilding Aggregates Higher education Extended warranties Home collected credit Audit Legal services Pharmacies Taxis Rolling stock leasing Comparison tools PPRS Off-grid energy Rail competition School uniforms Groceries Estate agents Retail banking Energy Payday lending Ferries Local bus services Use of dataDentistry Motor insurance PPI Fuels Scottish property agents Sub-prime brokerage Home insulation Second-hand cars Public-sector IT / comms Online reviews / endorsements Care homes CUPI Medicine distribution Payment systems Property searches Residential property mgmt Sale and rent back Timeshares Forex / money transfer Public subsidies Opium derivatives Pay TV movies Domestic LPG Store cards Insolvency practitionersLiability insurance Organic waste Public sector procurement Quick house sales Ticket agents New car warranties Internet shopping Equity underwriting Doorstep selling Consumer contracts Energy efficiency Domestic electrical goods Home repairs / improvements OTC derivatives Personalised pricing Mail consolidation Card surcharges Public service markets / procurement New / newly digitised markets Economically regulated or adjacent Healthcare / pharma Financial services Transport Private healthcare Cash ISAs NI banking Industrial / manufacturing / agricultural Conti payment authorities Low-income consumers Other cross- sector Market investigation OFT / CC / CMA project Travel agents Remote communities Private rental Housing Mobility aids Scottish legal Regulated professions or adjacent Classified directories Outdoor advertising Newspaper / magazine dist Online ad targeting Beer in pubs Retail / advertising / publishing DCTs
  • 9. 9 Collect and develop initial view on ideas i i i i Development of outline proposal Market Study Development of full proposal Ideas and leads Initial research Project Delivery Activity The “Funnel” i i i i i
  • 10. 10 i i i i Ideas and leads A market study is not the only outcome i i i i i Competition Enforcement Consumer protection Enforcement Call for Information Market Study Advocacy Compliance Work “Soft” Enforcement
  • 11. Sources of “problem markets” ● Other areas of CMA activity - Mergers - Competition Enforcement - Consumer Enforcement - Markets’ cases - Unresolved issues ● Problems identified by others - “Supercomplaints” from designated bodies - Market references from sectoral regulators 11
  • 12. “Horizon-scanning” ● Productivity analysis - Existing research on productivity drivers - “Top-down” data approaches - Central Government productivity priorities ● Consumer assessment - Trends and changes - Complaints monitoring 12
  • 13. Some reflections ● Directly linking productivity/consumer indicators to a role for competition policy are “challenging” ● Greater success from indirect approaches that start by identifying priority sectors/themes ● Often the best approach is to use market studies themselves as a means of identifying new areas ● Where markets change ● Talk to others - Academics, Think-tanks - Consumer bodies - Other NCAs 13
  • 14. Areas to start digging? ● Government involvement with markets ● Where markets are going through change ● Practices/behaviours that are common across different markets 14
  • 15. Achieving the objectives of market studies: impact on case selection OECD Workshop 9 March 2017 Daniel Gordon Senior Director, Markets CMA15
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