Speaking exclusively to GP, Monitor chairman David Bennett agreed that the Health Bill paves the way for providers to compete on price.
In a recent letter to NHS staff, the NHS chief executive said there was 'no question' of price competition in the NHS.
Mr Bennett, former head of policy for Tony Blair, became chairman of Monitor this week, having served as interim chief executive since March 2010. 'I understand why people are nervous about price competition,' he said. 'But over time there will be areas where it is useful.'
Mr Bennett, who has 'experience in sectors that have gone from monolithic public providers to market-type arrangements', including gas and electricity provision, said price competition was likely to be introduced slowly in the NHS.
'It is more likely to be at commodity level rather than specialist services,' he said. 'Monitor and the NHS Commissioning Board will be very careful about where we introduce it.'
Mr Bennett revealed that GP practices and consortia will not need to hold the 'economic licences' other providers will require to operate in the NHS.
He assured GPs that Monitor's role as enforcer of competition law in the NHS would 'not be as bad as they think'. Services 'naturally tied to GP practices' would be exempt from competition law, he said.
'Traditionally Monitor has been very arms-length. GPs hopefully will see that this idea that we will be inspecting them and monitoring every decision they make, just isn't going to happen,' Mr Bennett said. The idea that Monitor can scrutinise individual decisions is just not realistic - we will only act when we are alerted to a problem.'
Consortia will be expected to report to Monitor regularly, and the regulator will only act where there is a sustained breach of regulations, he said.
'A lot of the interventions will be complaints based, whether it's one consortium complaining about another or providers complaining that services are not being commissioned in a way that is fair.' Mr Bennett said GPs should 'not be exempt from enforcement law', despite BMA calls for Monitor's powers to be reduced.
He said it was 'not acceptable' for GPs to dictate to patients which hospitals they went to. 'You have to hope that over time GPs focus on helping their patients make the best choices for them, based on an objective assessment of the facts, not historical relationships,' he said.
He defined anti-competitive behaviour as 'a consortium making it clear it is not interested in talking to a provider, then stitching together a deal with the one trust it talks to'.
But he said there was 'no evidence from other sectors' that competition law would stop commissioners and providers collaborating, as claimed by opponents of the Bill.