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Word Count: 2,172
The best known passage in Adam Smiths Wealth of Nations 1776 says People of the same trade seldom meet together even for merriment and diversion but the conversation ends in a conspiracy against the public or in some contrivance to raise prices He also thought that It is impossible indeed to prevent such meetings by any law which either could be executed or would be consistent with liberty and justice Nowadays competition authorities seem to think otherwise and in recent years decided to introduce tougher regulations against anti-competitive behaviour Why does there always seem to be the need to regulate markets Vast majority of economists agree that competition is the basic organising principle of our economic system and is crucial in ensuring increasingly higher living standards and faster economic growth However they are not so much in accord over how it should be done and to what extent government should interfere in order to secure efficient competitive market Questions to be raised include could any competition policy be efficient Does any government intervention disturb the laissez faire sufficiently to suffocate the free trade Is the recent surge in merger activity the cause of collusion between firms How do cartels form and must they necessarily be bad John Vickers chairman of Britains Office of Fair Trading OFT argues that the intention behind the competition policy is to bring out the best of laissez faire An efficient competition policy would enable competitive market to become a better regulator than any regulation could be and hence reduce the need for them In order to achieve that efforts to bust cartels in Europe have been increased Typically cartel members may agree on prices output levels discounts credit terms which customers they will supply which areas they will supply and who should win a contract All of these types of cartel are prohibited by the Competition Act The Competition Act of 1998 which came into force in 2000 adopted
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