The action taken by the CC was appropriate in this case because by forcing customers to have their cars serviced at a garage attached to a franchised dealer, they are distorting the market because unfranchised dealers will see a fall in demand if customers who have bought cars are too afraid to void their warranty. Therefore by banning this in the warrnaty of new cars, there is much more competition in the car servicing market, meaning consumers can search for a service that suits them at a reasonable price. In addition, this lowers the barriers to entry for many car servicers, meaning that the market moves closer towards perfect competition. This means that car servicers will be under more pressure to cut their costs and provide a service at a lower cost, so the consumer will benefit (from a financial point). However, the government should make regulations to ensure that the quality of the service is not compromised as car servicers may be tempted to cut their costs to the extreme where they are not servicing cars properly and so making cars unsafe on the road, which can have many negative consequences, such as increased numbers of car collisions.
The action taken by the CC was partly appropriate in this case. This is an example of incomplete information – where the seller knows more about the product (in this case, the actual price of a ticket) than the consumer. This can lead to inefficient allocation of resources, as consumers are not buying from the seller selling at the lowest possible price. The seller with the lowest possible price tends to be the most efficient one, meaning that some businesses may benefit from incomplete information because they have no incentive to cut their costs or become more efficient. Similarly, using complicated language and making terms and conditions unclear regarding non delivery of tickets and refunds could be seen as consumer exploitation as consumers may not fully understand the contract that they are entering into. However, additional fees are understandable if the business has to spend a lot of their capital on advertising and promoting these tickets. In conclusion, the pricing of the tickets should not be altered as it is up to the business to decide how much they wish to price their tickets. The business should be able to differentiate their product by advertising or offering a different service e.g. first class next day ticket delivery. However, misleading contracts should be restricted to avoid incomplete information in the market and to allow different firms to compete better. Consumers should overall benefit from these changes, as they will understand what they are purchasing better as well as being able to choose a service that benefits them – for instance they may need a ticket urgently, and so are willing to pay the extra money.
In this case, the action taken was mostly appropriate because it is clear that Yell is enjoying abnormal profit and has considerable market power – owning 75% of the market share. Therefore, the Competition Commission should take steps to reduce the risk of their abusing their market position by charging higher prices than necessary. Because Yell has considerable monopoly power and control over the supply over the provision of classified direct advertising, they need to be strictly regulated to prevent exploitation of the consumer. The Competition Commission is also reducing their circulation in second tier advertising to 25,000 or less, which is beneficial to the market because it gives other firms such as BT an opportunity to increase their market share. This is greatly needed for BT to become a real competitor to Yell, as otherwise Yell has no real incentive to cut costs and provide cheaper deals for consumers. Therefore, this will push the market closer to the market ideal of perfect competition, which is best for the consumer. However, some people may argue that it is unfair…