In business, competition can be defined as "the effort of two or more parties acting independently to secure the business of a third party by offering the most favorable terms.”(Wikipedia, 2014) Competition is an essential element among enterprises as it helps them to allocate resources efficiently and a prerequisite for free market economy as mentioned by Adam Smith.
Competition policies and regulatory mechanisms are used to ensure that consumers have wider range of products and services, to prevent uncompetitive practices (i.e., firms do not collude), to insure that firms follow the quality standards and safety regulations and finally, to promote legitimate and liberal competition.(Tutor2u.net, 2014) UK government competition policy has been distressed on adjusting market behaviour and especially on abuses of market power from firms acting individually in a specific market (i.e., a monopoly). In order for the UK’s government to accomplish this, they have been relying largely on legislation, also on a measure of self-regulation and persuasion. The UK government simply does not allow monopolies as they seek to promote competition unlike in the United States.(Worthington and Britton, 2009) The UK government has been using two strategies. These are privatisation and changes in legislations to
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The most significant law is Competition Act 1998. The act aims to prevent abuse of market power, there are numbers of agreements applied to this particular act. For instance, sharing business information, fixing prices, collusion of tendering and many more.(Rodger and MacCulloch, 2015) EasyJet follows the Competition Act 1998, as it operates in an oligopolistic environment it needs to be aware of its rivals in the industry. Nevertheless, sharing information with its rivals or colluding is simply illegal. Another act is Fair Trading Act 1973, this Act involves customers protection and to promote equitable