Competition Policy - Market Liberalisation

The main principle of EU Competition Policy is that consumer welfare is best served by introducing fresh / extra competition in markets where monopoly power exists.

Frequently, these monopolies have been in network industries such as transport, energy and telecommunications. In these sectors, a distinction must be made between the infrastructure and the services provided directly to consumers using this infrastructure

Case Study:

OFT report finds welfare gains from liberalising pharmacies

The OFT has produced a new report looking at some of the welfare and efficiency effects of the decision to liberalise the retail pharmacy industry in the UK. The report finds that "Partial liberalisation of the pharmacies market has brought significant benefits for consumers, including shorter waiting times; a greater choice of pharmacies and extended opening hours....the number of pharmacies operating in England has risen by nearly nine percent. Fears that enabling easier entry would lead to large numbers closing have so far proven unfounded."

The wider availability of supermarket pharmacies on spending by consumers on over-the-counter medicines has led to conservatively estimated annual savings of around £5m. In the UK retailers have been free to set their own price since resale price maintenance (RPM) on branded OTCs such as pain killers and flu relief tablets was abolished in 2001. The largest share of any one company is now that of Boots (18.3 per cent), following the merger with Alliance Unichem (owner of Moss Pharmacies) to form Alliance Boots in 2006. In-store supermarket pharmacies – account for almost 7 per cent of the total.

Source: Tutor2u economics blog, March 2010