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Economics And Legal Aspects Of Com Policy

1989 words - 8 pages

“Competition is central to the operation of markets, and fosters innovation, productivity and growth, all of which create wealth and reduce poverty.” Competition is vital to many markets, and thus their economy. When manufacturers compete, they illustrate competitive prices and are motivated to demonstrate innovation and produce a product of higher quality as well as opening opportunities for the creation of jobs and new products to the market. However, sometimes individuals create a cartel in order to manipulate the market and the consumers to benefit solely the producers-they are essentially the polar opposite of competition. Cartels arise when a group of firms, or producers, decide to ...view middle of the document...

  The Act lists some specific types of behaviour which are expressly prohibited.  These include agreements which:
* fix prices
* limit or control production or markets
* share markets or sources of supply
* apply dissimilar conditions to equivalent transactions with other trading parties or attach supplementary obligations to a commercial contract which have nothing to do with the subject of the contract”
There have been a couple amendments to the Competition Act 2002, but this section still stands. Cartels are illegal for a number of reasons: aside from the fact that through their cooperation, competition is eliminated (as stated earlier), cartels are unethical by manipulating and cheating consumers, they stunt economics growth, and they discourage innovation and new products to the market. When firms produce within a cartel, they have no motivation to create new and improved products; also, with barriers to entry discouraging other manufacturers from entering the market, new competitors cease to exist. Often times, small and individual businesses simply cannot compete with the bigger firms that have complete control of their product in the market, and so new products, better quality, and the creation of jobs will never become a reality. Not only do consumers pay the price of over-valued goods, but they also pay the price of little to no choice in the products they buy and aren’t offered products of a much higher quality at a reasonable price. The only individuals who benefit from a cartel are those on the producer end of the market-after eliminating any outside competition, taking control of the quantity produced and the price of a good, and generalizing the product sold, cartels may efficiently exploit customers to reap greater profits. From a government standpoint, the obvious reaction is to eliminate all cartels in order to promote economic growth, innovation and new product lines, and thus creating more jobs and improving the economic situation for everyone involved, not just the producers. And so the Competition Act was created and made to regulate the market and keep cartels from taking over a market.
Given that cartels are illegal, many of them that are active become very secretive in order to avoid facing the consequences of breaking the law. So, it can prove to be very difficult trying to find cartels and charge the firms that participate in the illegal operation. So, they established the Leniency programme, which allowed an individual to turn in a substantial amount of credible evidence that would warrant an investigation or proof an infringement, and in turn be granted full immunity with regards to the prosecution of the firms involved. Due to the lack of success in independently finding and prosecuting cartels, this programme is used as a tool to expose the operations from the inside.
The first of the two cartel cases that I will evaluate today is the Citroen Case. In 2009, Citroen Dealers...

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