2.4 Key Concepts in Competition Policy

This section introduces some key concepts that underpin competition policy and sector regulation.

The aim of competition policy is to promote sustainable competition. Competition analysis generally asks the question: Will a given practice, transaction, or business acquisition reduce competition or increase market power in a given market?

Competition analysis follows the following steps:

• Define the relevant market or markets,
• Assess the level of competition in the market, without the behavior or act in question, and
• Assess the level of competition in the market, with the behavior or act in question.

The level of competition in a market depends on the structure of the market, and whether it meets the conditions for effective competition. Important considerations include:

• Whether any firms in the market have market power, and the impact of the trade practice or business acquisition in question on market power,
• In particular, whether any firms in the market have a dominant position or significant market power in the market,
• Any barriers to entry or exit and the potential for competition from new entrants,
• The role of any essential facilities.