1. Can big business be controlled? Unit 5.3.4
Mrs Gutteridge

2. Why should big businesses be Controlled?
How can they be controlled?

3. Monopolies
Monopolies Good?
Value for Money
Developing new products
Economies of scale (Natural monopoly)
How?
Government Intervention – Competition Commission
Regulation
Self Regulation
Monopoly – a business which has a market share of 25% and can therefore influence the market
Monopolies Bad?
Reduced competition affects: Prices and Choices
Encourages Excessive Profits

4. Regulation What is regulation?
Rules set by government or their agencies that seek to control the operation of firms who may have monopoly power in their own industry
Regulation is designed to deal with the problem of market failure – where markets fail to reach an optimal allocation of resources
Monopoly power may lead to consumers being exploited (i.e. prices charged above the true marginal cost of supply) – leading to excess profits being made by suppliers in the market
In terms of regulation of monopoly the government attempts to prevent operations that are against the public interest – so called anti-competitive practices
Regulators – independent bodies set up by the Government to monitor and regulate business activity eg Education Ofsted, Water Industry Ofwat etc.

5. Problems in the market structure
Problems occur when the market structure in a given industry becomes monopolistic – e.g. if a merger or a take-over causes a firm to supply more than 25% of the market output (defined as a working monopoly). Mergers are investigated by the Competition Commission.
Oligopolies can also lead to market failure – particularly if there is evidence of collusive behaviour by the dominant businesses within an industry

6. The Competition Commission
The Competition is a public body established by the Competition Act Formerly known as the Monopolies and Mergers Commission, it came into being on 1st April 1999
The Competition Commission has two main roles
1.   Reporting on referrals made by the Director General of Fair Trading, the DTI and the main utility regulators
2.   Hearing appeals against prohibitions under the Competition Act 1998
Government Regulation to protect public interests

7. The Competition Commission
Makes decisions and takes action on complaints by from The Office of Fair Trading.
It can block Mergers, Takeovers
Forcing businesses to sell off its assets and change the way it markets operate
Any business with more than 25% market share is subject to investigation by the CC.

8. Changes to Royal Mail https://www. youtube. com/watch

9. Competition Commission tackle high Car Insurance 2012
Motor insurance premiums are unnecessarily high for all drivers owing to the complex chain of claims, the Competition Commission has said.
The higher premiums come from the cost of courtesy cars and repairs which is paid by the insurers of motorists who caused the accident.
The Commission discovered that post-accident repairs were often shoddy.
It also raised concerns about difficulties for motorists trying to identify the best value products.

10. Car Insurance falling 2014 http://www.bbc.co.uk/news/business-25911637
Comprehensive motor insurance premiums fell by £36, or 8.9%, on average in 2013, according to insurers.
The average annual policy, bought during the final three months of the year, cost £370 compared with £406 a year earlier, the Association of British Insurers (ABI) said.
Insurers' predictions of falling claims for whiplash has helped lower prices.
However, the cost rose by £5, or 1.4% in the final quarter of the year compared with the previous three months.

11. Exam Practise
Identify two ways that business growth can be controlled? (2 marks)
Outline how the Competition Commission can affect a business with more than 25% of market share (3 marks)
What is meant by self regulators and give an example (2 marks)
How could pressure groups affect large businesses eg Plane Stupid a pressure group which campaigns against the expansion of airports and airtravel? (6 marks)

12. Next Lesson 5.4 Is Growth Good?
We are going to explore how an economy is measured?
Economic Growth?
Causes of Economic Growth?
Role of Governments
Links to your Citizenship and Geography subjects