The machinery of control

The legal control of monopoly has been substantially extended and modified since the first legislation in 1948. The laws relating to monopoly have three major targets.

1. Monopolies. Fn law a monopoly exists when (a) one firm has at least 25 per cent of the market for the supply of a particular good or service (i.e. a scale monopoly), or (b) when a number of firms, which together have a 25 per cent market share, conduct their business so as to restrict com­petition (i.e. a complex monopoly).

2. Restrictive trade practices. These are agreements between independent firms in respect of price or other con­ditions of supply which are designed to restrict competition between the parties to the agreements.

3. Mergers. These may be horizontal, vertical, or con­glomerate.

The investigation and control of monopolies and monopolistic practices is carried out by three important institutions, The Office of the Director-General of Fair Trading, The Monopolies and Mergers Commission, and the Restrictive Practices Court.

1. The Director-General of Fair Trading (DGFT)

This very important office was created by the Fair Trading Act of 1973. The Director-General is obliged to maintain a continuous survey of and collect information on all types of trading practices in relation to the supply of goods and services. He is, in fact, a kind of official watch­dog in the market place. The Office of Fair Trading operates in three main areas.

i Competition policy: monopolies, restrictive trade practices, mergers.

ii Consumer credit.

iii Consumer affairs.

2. The Monopolies and Mergers Commission (MMC)

This organisation formerly known as the Monopolies Commission was established by the 1948 Monopolies and Restrictive Practices Act. The functions of the MMC are to investigate monopolies and proposed mergers referred to them and to report on whether they consider the existing situation or the proposed changes to be in the public interest. They also make recommendations to the government on any actions they think are necessary to protect the public interest. The MMC consists of a full-time chairman, two part-time deputies and twenty-two other part-time commis­sioners drawn from such fields as administration, industry, commerce, trade unions and the academic world. There is also a professional full-time staff. The MMC does not have the power to initiate investigations; it can only take action when a case is referred to it by the DGFT or by the Secretary of State for Trade. It has no powers to enforce its recom­mendations; whether any action is taken on the findings of the MMC rests upon a decision by the Secretary of State.

The number of investigations is limited by the resources of the MMC. Its maximum capacity is about 15 investiga­tions of monopolies and mergers at any one time. In prac­tice the MMC is able, on average, to produce about 6 monopoly reports and 6 merger reports each year.

The duties of the MMC are to conduct enquiries into:

(a) monopolies in the supply of goods and services;

(b) merger proposals;

(c) local (or geographical) monopolies;

(d) the general effects of specific monopolistic practices (e.g. price discrimination);

(e) the efficiency, costs, and quality of services provided by public enterprises;

(f) anti-competitive practices pursued by any individual firm whether or not it is a monopoly.