In addition to looking at the impact on individual firms, it is important to consider the impact that a regulation or policy might have on competition between firms. Where regulations restrict competition – for example by making it harder for new firms to enter a market – this can increase costs for consumers in these markets. Alternatively, regulations or policy can be designed to increase competition within the market. A competitive market is one where businesses, large and small, are able to compete to deliver services and products to consumers. Competitive markets drive innovation, productivity, sustainable economic growth and provide consumers with a choice of goods and services. These costs and opportunities need to be factored into the overall impact assessment.
The overall aim of the competition assessment is to find a policy approach which encourages competition within the market, subject to achieving the wider policy objectives.
The main elements of the competition assessment are:
- Identifying the relevant markets, products or services which might be affected by a policy
- Identifying possible restrictions on competition in these markets resulting from the policy proposals, by answering the following questions:
- Will the measure directly or indirectly limit the number or range of suppliers?
- Will the measure limit the ability of suppliers to compete?
- Will the measure limit suppliers’ incentives to compete vigorously?
- Will the measure limit the choices and information available to consumers?
A competition concern may be identified if at least one of these conditions is met. You should include the questions and your answers within your BRIA to provide evidence that your proposals do not have any impact on competition.
The Competitions and Market Authority (CMA) provides guidance on carrying out competition assessments, and can provide informal advice in particularly complex cases. More general examples and explanation of the way government policy can affect competition are given in the CMA publication ‘Government in Markets’.
Economist colleagues can also provide assistance in answering whether the proposals are likely to prevent, restrict or distort competition in any of the affected markets.
Email: Fraser Reid