Category: Economics for Business: Ch 21
The EU has imposed a record £680m fine on Microsoft for imposing unreasonable prices on their rivals for access to the Windows code that they required to be able to build complementary software. The record fine is a drop in the ocean for Microsoft, representing just two weeks cash flow, but they hope that this marks an end to the dispute with the EU. They argue that new working practices will help improve interoperability and that they have already begun to offer better access to code for their competitors.
Microsoft hit by 899m euro fine for failure to comply with EU ruling Times Online (28/2/08)
EU fines Microsoft record £680m ‘to close dark chapter’ in fight against monopoly Guardian (27/2/08)
The EU’s frustration with Microsoft Guardian (27/2/08)
Ten years of legal wrangling between Microsoft and EU Guardian (27/2/08)
Pity the big, bad wolf Guardian (27/2/08)
Questions
| 1. |
Explain why the EU Competition Commissioner has ruled that Microsoft has behaved anti-competitively. |
| 2. |
Describe the role of the EU’s Competition Commissioner in improving the competition in markets.
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| 3. |
Examine other options available to the EU’s Competition Commissioner to improve the competitive situation in European markets. |
British Airways has been fined £270m for their part in a price-fixing cartel. Fines were levied by both the US Department of Justice and the UK Office of Fair Trading following an agreement between British Airways and Virgin to fix the level of surcharges charged to passengers as a result of rising fuel prices.
Where’s Branson’s apology? BBC News Online (Robert Peston blog) (7/8/07)
BA’s price-fix fine reaches £270m BBC News Online (1/8/07)
OFT defends ‘snitch’ policy Guardian (5/8/07)
BA boss speaks out over price fixing Guardian (3/8/07)
How arch rivals colluded to hike up cost of air travel Guardian (2/8/07)
Questions
| 1. |
Define what is meant by the term ‘price-fixing cartel’. |
| 2. |
Explain the characteristics of a market that are most likely to result in a cartel. |
| 3. |
Discuss policies that the government could put in place to prevent this kind of price-fixing arising in the future.. |
Reading the first article linked to below, you may be forgiven for thinking that farming has moved into the realms of science fiction. Dairy farming has moved determinedly into the era of technology and now benefits from extensive economies of scale with much higher productivity levels than even a decade ago. Yet 3000 dairy farmers are planning to leave the industry in the next two years and even the largest farms are struggling to make money. The processing sector has become significantly more concentrated and margins are being squeezed ever further by the power of the supermarkets, so has the market become unbalanced with too much power in the hands of supermarkets and processors?
Rising prices, failing farms. The strange story of milk Guardian (24/4/07)
Why British dairy farming is in crisis Guardian (24/5/07)
Questions
| 1. |
Describe the market structure of the milk industry. |
| 2. |
Discuss the extent to which this market structure has changed the level of prices in the market for milk in recent years. |
| 3. |
Evaluate possible measures that governments could implement to make the market for milk more competitive. |
The Office of Fair Trading (OFT) is to set up an investigation into the reality of ‘free banking’ to establish whether greater transparency in charging would benefit consumers. The articles linked to below consider the scope of this investigation and look at what some consider the ‘myth’ of free banking.
OFT probe into bank charges could mean end of ‘free banking’ The Scotsman (27/4/07)
‘Free’ banking could end as overdraft charges challenged Guardian (27/4/07)
Watchdog probes cost of banking BBC News Online (27/4/07)
Charges inquiry may spell end of free banking Telegraph (28/4/07)
OFT considers ending ‘free’ banking Times Online (27/4/07)
Q&A: Banking investigation and you BBC News Online (26/4/07)
Calling banks’ bluff BBC News Online – Robert Peston blog (26/4/07)
Free banking ‘myth’ to be probed Guardian (26/4/07)
Questions
| 1. |
Explain the reason why some people consider free banking to be a ‘myth’. |
| 2. |
Examine the likely impact of the market structure in the market for banking on the level of competition. |
| 3. |
Assess two policies that the government could implement to ensure that consumers get a fairer deal from their banks. |
With the news this month of the death of Boris Yeltsin, it has been an opportunity to look back at the economic legacy of the first democratically-elected President of Russia. Boris Yeltsin took over at a time when all goods were scarce and the industrial infrastructure was crumbling. He adopted policies of extensive privatisation and abandoned price controls. To what extent has this created the Russia of today and what is the legacy he has left behind?
Yeltsin’s moment The Economist (subscription) (26/4/07)
Yeltsin’s economic legacy BBC News Online (24/4/07)
Questions
| 1. |
Explain the reasoning behind the policies that were adopted by Boris Yeltsin in his early years in office. |
| 2. |
Discuss the extent to which those policies enabled the development of the Russian economy. |
| 3. |
Assess the current state of the Russian economy. |