How weak is customer response in the energy market, why, and what is the benchmark?

March 17, 2016

(by Catherine Waddams) In its provisional decision on remedies for the Energy Market, the Competition and Markets Authority measures weak customer response by the amount of money which is ‘left on the table’ by customers who do not switch to cheaper tariffs.  However, research at the Centre for Competition Policy shows that understanding such inertia is complex, and that consumers differ considerably in their propensity to change suppliers.  This variation is found even among comparatively well informed respondents who are aware of potential gains and the time it might take them to search for and switch to a better deal, and even after accounting for observable demographic and other factors, and for consumer expectations.  This matters both for designing an effective package of remedies and, in due course, for evaluating their success.  Why? Read the rest of this entry »


Should Energy Customers be Empowered or Protected?

March 14, 2016

(by Catherine Waddams) The Competition and Markets Authority (CMA) has argued that competition is the way to empower most energy customers, but that prepayment users need additional protection. The compromise highlights the tension between competition and protection, because although competition is often the best way to ensure the lowest average prices and highest service quality for consumers on average, it is a process which carries no guarantees about the outcomes, nor about which particular customers and providers may win and lose from the process. Read the rest of this entry »


The CMA’s Energy Market Provisional Remedies: Right Direction but Inadequate, and Missing an Important Trick

March 11, 2016

(By Dr David Deller) Yesterday the CMA published its widely anticipated provisional remedies to its long-running energy market investigation. Overall there is a significant gap between the size of detriment claimed by the CMA and the scale of the provisional remedies proposed by the CMA. It is this inconsistency which is at the heart of a dissenting view regarding the provisional decision expressed by one of the decision makers.[1] Beyond highlighting this inconsistency, the purpose of this blog is twofold: to highlight the beneficial remedies; and to raise outstanding questions that the CMA should address in its final decision and report. While the proposed remedies have limited downside risks, they are also unlikely to reset the market for the majority of consumers. A lot hangs on the (probably questionable) assumption that smart meters will solve the competition questions. Read the rest of this entry »


The Economics of Pay To Delay Deals

February 15, 2016

(by Farasat Bokhari) On Friday 12 Februrary 2016, the UK’s Competition and Markets Authority (CMA) issued drug manufacturer GlaxoSmithKline (GSK) a £37.6 million fine with an additional £7.4 million imposed on partner drug manufacturers for engaging in a so-called ‘pay for delay’ or ‘pay to delay’ deal that lasted from 2001 to 2004 for its antidepressant drug Seroxat. As discussed in a recent blog by my colleague, Sven Gallasch, GSK have not admitted wrongdoing and may challenge the findings by arguing the arrangement was pro-competitive. Between 2000 and 2010 there were 57 pay to delay deals in the EU, and 66 just between 2008 and 2010 in the US. The US Federal Trade Commission (FTC) says these deals cost US consumers $3.5 billion a year, but have attempted to challenge them with mixed results.[i] Pay to delay cases are relatively new in Europe and the GSK case is the first fine for the practice to be imposed by the CMA.

This blog discusses some of the key issues and incentives surrounding pay to delay deals and is aimed at stimulating further discussion. Read the rest of this entry »


The CMA’s first strike against pay for delay settlements in the United Kingdom

February 12, 2016

(By Sven Gallasch) On 12 February 2016 the Competition and Markets Authority (CMA) issued its first infringement decision concerning so-called pay for delay settlements in the UK pharmaceutical market, imposing a fine of £ 44.99 million on the branded pharmaceutical company GlaxoSmithKline plc (GSK) and a number of generic pharmaceutical companies including Generics (UK) limited and Alpharma Limited. This blog post considers whether drug companies’ claims that this practice is actually beneficial to customers have any merit. Read the rest of this entry »


Unfair purchasing practices and the Groceries Code of Conduct: the Tesco investigation

February 1, 2016

By Ignacio Herrera Anchustegui (University of Bergen). On 26 January 2016 the Groceries Code Adjudicator made public its investigation into Tesco plc concerning the possible breaches of the UK Groceries Code of Conduct. After an almost yearlong investigation the Adjudicator determined that Tesco had engaged in unfair purchasing practices prohibited by the Groceries Code of Conduct (“the Code”) by delaying payments that were due to its suppliers. Although the Adjudicator did not impose any financial fine on Tesco, it did issue five recommendations to be followed by the supermarket retail chain in order to prevent payment delays in the future. This blog discusses the Tesco case and its implications for future investigations. Read the rest of this entry »


BT/EE Merger: the importance of market definition

January 20, 2016

(by Richard Cadman) Last Friday, the Competition and Markets Authority (CMA) gave unconditional approval to the acquisition by BT, the UK’s largest fixed telecommunications provider, of EE, its largest mobile communications provider.  The CMA concluded, after a nine-month long investigation, that the merger would not lead to a Substantial Lessening of Competition (SLC) and that neither the wholesale nor retail customers of both companies would suffer any harm from the merger.  How much did this depend on product market definition? Read the rest of this entry »


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