Business Law

Business Law’;

BTEC Higher National Diploma in Business
Unit Number and Title
26. Business Law
Start Date
Assignment Due Date
Assessor Name
Kamran Ahmed
Assignment No
Assignment Title
Understand the legal rules relating to monopolies,
mergers and anti-competitive practices
Understand key provisions relating to intellectual
property rights
Assignment Brief
In this assignment, students will know who sets the
rules relating to monopolies, anti-competitive prac
and IPR in the UK
Assignment Task / Description
Read the case studies before attempting the answers
. When writing your answers, give the
theoretical position in your answer, make use of ex
amples drawn from the UK, apply the theory
to these case studies.
Car Industry
The clearest evidence of anti-competitive pricing b
ehaviour in the UK car industry came with the
admission by Volvo in July 1999 that it had entered
secret agreements to keep British car prices
high. This appeared to be just the tip of an iceber
g, with car manufacturers fixing prices through
the system of selective and exclusive distribution
(SED). In other words, manufacturers would
only supply through ‘official’ dealers who would se
ll at the list price (or at small agreed
When we consider the difference in price between id
entical models in Britain and mainland
Europe the discrepancies were huge. The Competition
Commission report published in April
2000, found that car buyers in Britain were paying
on average some 10 to 12 per cent more than
those in France, Germany and Italy for the same mod
els For 58 of the 71 models analysed by the
Commission, the UK price was at least 20 per cent h
igher than in the cheapest country. The
Commission concluded that British car buyers were p
aying around 10 per cent too much for new
cars, or some £1100 for an average car.
The price discrepancies between Britain and Europe
were maintained by car manufacturers
blocking cheaper European cars coming into the UK.
Manufacturers were accused of adopting a
number of anti-competitive practices. These include
threatening mainland European car dealers
with losing their dealership if they sell to Britis
h buyers, and delaying the delivery date of right-
hand drive models to mainland European dealers in t
he hope that British buyers changes their
mind and go back to a British dealership.
As the problem involved more than one EU country, t
he European Commission (EC) also
examined the issue. It concluded that the motor veh
icle manufacturers had agreements with
distributors that were too restrictive. In 2002, th
e EC changed the ‘Block Exemption’ regulations
governing the sector to allow distributors to set u
p in different countries and to sell multiple
brands of car within their showrooms. Furthermore,
distributors who are offered an exclusive
‘sales territory’ distribution agreement by car man
ufacturers are now allowed to resell cars to
other distributors who are not part of the manufact
urer’s network. This should help to develop
other sales outlets such as car supermarkets and In
ternet retailers. In addition, the regulation has
opened up the repair and spare parts sector to more
Changes in the regulations, and the addition of ten
new member states in 2004 and another two
in 2007, have made the car market more competitive
by increasing the sources of supply. Slowly,
prices of new car prices have been converging acros
s the EU towards the lower-price markets.
But what about the UK? Since 2003 new car prices ha
ve fallen. In August 2005 new car prices
fell by 0.5 per cent over the year, while general p
rice inflation over the same period was 2 per
cent. There is still scope for shopping around outs
ide of the UK, however – 17 out of 81 models
listed by the EC in August 2005 were at least 20 pe
r cent higher than the average EU price.
(LO3 Assessment Criteria 3.1 & 3.2)
Do you believe that these case studies illustrate m
onopolies and anti-competitive practices?
Extract information from each case study to support
your answer.
Explain the role – from a legal perspective – of th
e Competition Commission (CC) and the
UK Office of Fair Trading in dealing with these spe
cific monopolies and anti-competitive
practices and in monopolies and anti-competition pr
actices in general
The Competition Commission enquiry into supermarket
s, which began in April 1999, followed a
nine-month investigation by the Office of Fair Trad
ing (OFT) into the major supermarket chains’
business activities. The OFT identified three major
areas of concern: the use of barriers to entry,
the lack of effective price competition, and the re
lationship between the large supermarket chains
and their suppliers.


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