Claimed impact of the OFT's competition enforcement work

OFT report (23 pages, PDF) claiming that the OFT's work on Competition Act 1998 enforcement has saved customers at least £22 million a year on average over 2000-2005, and that its merger control work has saved at least £128 million a year over the same period. The OFT's current annual expenditure on competition enforcement is about £15 million, with merger control representing a small part of the total (but substantial merger control costs are incurred by the Competition Commission).

The estimates of impact appear to be against a counterfactual of no competition law rather than the counterfactual of a system based on private enforcement of the current law. They do not include deterrence effects and assistance given by the OFT for compliance. The calculations appear to have been prepared in connection with the recent NAO review.

For enforcement of the prohibition on abuse of a dominant position other than predatory abuses, the paper draws on a 2002 OFT research paper to "conservatively assume that the consumer savings resulting from OFT interventions are at least equal to 1 per cent of the relevant market turnover for one year". The paper does not disclose what proportion of the claimed impact is attributable to that rule or to the other models and assumptions proposed for cartels and predation.

Filed under NAO, OFT, Regulators.

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