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6 Cards in this Set

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Regulation – EU Competition Commission – Microsoft
Microsoft hold a dominating position within the PC operating system market. They argue the profits they get from this have helped them to innovate and provide what consumers want. Complaints have been launched by software developers that given this dominant position Microsoft need to make it easier for them to get their software used on a PC. Microsoft were bundling their own internet browser and media player and not releasing any information on their source code so software developers could produce software that links in with Microsoft. The EU commission have fined Microsoft a total so far of 1.68 billion euros and forced them to give anyone who installs Windows a choice of which browser and media player to use from the start AND give competitor software makers their source code so it is easier to make software that works with Windows.
Regulation – UK competition commission and mergers
The UK competition commission approved the takeover of Safeways by Morrison but ordered Morrison to sell certain Safeways shops so that they didn’t have a local monopoly in certain locations.
In 1998 the UK competition commission vetoed Sky buying Man Utd as they felt it would reduce competition for premier league rights and there were no remedies to stop this happening.
Regulation – Price Capping
The water companies hold natural monopolies for their areas due to the enormous minimum efficient scale caused by the infrastructure needed to carry out their service. This means the regulator needs to act as competition. Every 5 years an agreement is made to cap prices using the RPI+K formula – where K is the agreed amount of capital investment needed to maintain the water supply network. Different water companies get different deals depending on the amount of work they need to do. The last agreement was for an average of 18% rises over 5 years and a new round of negotiations are beginning.
Regulation – Performance targets
Rail companies have to meet performance targets on reliability and punctuality set by the Strategic Rail Authorities. If they don’t meet these performance targets they can be fined, although in the most extreme cases re-nationalised – which is what has happened to the East coast line due to National Express not meeting performance targets.
Regulation – Privatisation
The Thatcher government felt that if they sold British Telecom, British Gas, Water, and British Rail to private shareholders AND opened up their markets to competition they would make them more efficient, both productively and allocatively. Some of these have been successful, but some, particularly where there were natural monopolies, have been found very difficult to regulate in lieu of competition. They have also run into problems with unions on the changes in working practices and redundancies involved.
Collusion – whistle-blowing
British Airways and Virgin had been colluding over both putting up price rises when the cost of fuel went up (called fuel surcharges). Virgin blew the whistle and were granted immunity even though they had been just as involved as BA. BA fined £300m and the executives involved are in court in January 2010 and could go to jail.