Let's start with a narrowly realistic: all monopolists always fight to keep their monopolies.

But the entrance of competition often means that single suppliers have to get up earlier, work harder, stay open longer, reduce prices, take risks, invest more.

The desire to be a monopoly is a human condition, because succeed over its rivals is a big challenge.

Playing monopoly for real money could make perfect sense - as long as you're the monopolist and that depends on the closeness of substitutes

To remedy the competition problems, the commission will follow interim measures in relation to the sale of Gatwick Airport” which presents significant opportunities for potential new entrants.

This brings us to BAA, the airports operator, “privatised by Mrs Thatcher in 1987, with a price tag of £1.2bn, and recently bought by Ferrovial, the Spanish company (Marketwatch.com, 2008), for £10bn”.

BAA is a monopolist ((Marketwatch.com, 2008), of course, nevertheless definitely not a natural one.

“The CC releases the BAA signatories from paragraph 1, ‘The preservation and sale of Protected Airport Companies.”

BAA plc (BAA) owns seven airports in the UK: Heathrow, Stansted, Gatwick (the London airports) and Southampton in the south of England, and Glasgow, Edinburgh and Aberdeen in Scotland switch 63pc of all flights to and from the United Kingdom (Utilityconsultants.co.nz, 2009; btinternet.com, 1998).

This includes a 92pc monopoly on air traffic in and out of London, and 86pc in Scotland.

The Office of Fair Trading announced in May an investigation into the whole of the UK airport market and there were possibilities that they were eventually referring BAA to the Competition Commission.

In March 2007 the Office of Fair Trading (OFT) has referred to the Competition Commission (CC) requiring the CC to examine whether there is any unpleasant outcome on competition (AEC) in the market for the supply of airport services in the UK.

The CC published its Emerging Thinking Report in April 2008, contained by which it careful that possession by BAA of all seven airports was negatively affecting competition among them.

This was followed by the publication of the CC's provisional findings on 20 August 2008.

The Report confirms the CC's provisional conclusions that competition effort subsist at each of BAA's seven airports, follow-on in an AEC for both passengers and airlines (Building.co.uk, 2009).

The Competition Appeal Tribunal issued a judgement that the application under section 179 Act from BAA Limited succeeded on ground of ‘apparent bias findings on 21 December 2009.

The foundation of these issues is two angles: first, common ownership of the airports by BAA and, second, other particular features of the sector which restrict competition together with the current system of regulation, planning and aspects of Government regulations.

Athough Common ownership of the three BAA London airports prevents competition between them.

Although the strength of competition among these airports may primarily be inadequate by facility constraints and price controls, the CC finished that these constraints are themselves at least in part the result of common ownership.

However the commission concluded “there are a number of features of the markets for airport services supplied by BAA, which each (and, in certain circumstances, in combination) prevent, restrict or distort competition, and thus have an unpleasant effect on competition (AEC) between airports and airlines.”

Common ownership of the London airports moreover restricts or distorts competition between airports in relation towards facility development and exacerbates certain existing inappropriate of the regulatory system.

Common ownership of Glasgow and Edinburgh Glasgow airports prevents competition between those airports; along with Common ownership of  Heathrow with Gatwick and Southampton prevents competition from Gatwick and Heathrow constraining Southampton.

The CC established to this common ownership has resulted in a deficient of engagement by BAA among its airline customers, inadequate management strategic by BAA of its airports, unproductive investment and disappointing passenger satisfaction at many BAA airports.

The CC found that remedies are compulsory to deal with the AECs ensuing from common ownership and its interrelationship through other type of the sector in addition to the AECs ensuing from aspects of government policy and regulation.

The CC did not regard as that remedies are requisite to deal with quality of forecast limits that limit competition, given the introduction of important improvements to the forecast development through up to date reforms such as the Planning Act 2008.

Therefore, expectedly, BAA has already implicit that it has the taste to undertake the CC head on in the Competition Appeal Tribunal (CAT): Colin Matthews, BAA's chief executive, was quoted in London's Times newspaper as saying the following:

"We might have to appeal if we reach the conclusion that it is simply not practical to proceed…It is not just a question of whether we agree or not with the Competition Commission's analysis, it is also a question of the practicalities of selling three airports in the current, extraordinarily tough conditions."

Source: Essay UK - http://doghouse.net/free-essays/economics/the-competition-commission.php

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