Advice to a government agency against the use of market share caps to prevent further expansion of large players

CCCS advised a government agency in relation to a market where players enter or expand through a tender process, and where the implementation of a market share cap or market concentration threshold was being considered to maintain competition. A key concern of the agency involved smaller players being discouraged from participating in tenders because of incumbent larger players, which may have the scale to price out their competitors.

CCCS advised that imposing market share caps or market concentration thresholds to prevent large players from being awarded tenders to expand further may instead lead to a less competitive outcome as it would remove the competitive pressure from large players. CCCS recommended that the government agency focus instead on minimising the barriers to entry and expansion such that there are fair opportunities for smaller players or new entrants to win tenders.