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Competition - in whose interests?

I do take requests for topics. Usually I will start the entry. Sometimes I even get around to finishing it. I've been asked about competition. In Australia, competition is nominally overseen by the ACCC. But what really happens, and what should happen?

Competition in Australia is a farce. The ACCC has neither the teeth, the brief nor the chief to protect competition for the benefit of customers or society. No offence to Mr Samuel, but he has too many former friends to lose by going after the big end of town and every time he makes the necessary pragmatic decision to back down, it diminishes the standing of the ACCC further.

So the first question: do we need restrictions on anti-competitive practices, and if so, why? Short answer - businesses need restrictions because they can't be trusted. Adam Smith said. More to the point, why should they? If you are in a business, your job is to do the best you can for your business. Not to look after your customers. Not to be nice. Just to make money in short, medium and long terms. If you can crush oppositions, you do. If you can get away with gouging customers, you do. Why not?

Government's job is to put in the limitations so that customers don't get gouged too badly and so that a well run company with a reasonable product isn't put out of business. This doesn't mean that Governments must protect competitors, it just means that they should protect competition.

I'm now about to make a series of statements. If competition policies are enacted and enforced properly, you won't be able to think of any examples where this has happened. Or if it did, the offending parties were heavily prosecuted. What do you get if you cross a pig and a chicken?

Companies should be prevented from dropping prices to unsustainable levels in order to drive smaller/other competitors out of business.

Companies should not be allowed to fix prices with competitors. When suspicion of this occurs, companies should be forced to justify prices.

Where a company is a player in multiple parts of the supply chain, such as if a company is involved in both distribution and retail, and particularly if the company is the only player in one side, such as distribution, they should be forced to charge the other parts as if they are a separate business. Particularly if they have a monopoly on one side.

Where a company has a monopoly or a very limited oligopoly, such as two or three players, or if normal competitive forces don't apply, the default should be that their behaviour is regulated and they are forced to justify their positions.

So when can competition be disregarded? When society doesn't lose out. In particular, if companies or organisations are working within a co-operative paradigm or a collaborative framework, and knowledge is being shared, competitive requirements can be suspended. For instance, open source software is inherently anti-competitive. But it should be allowed because the results are openly available. Similarly, I have no objections to knowledge generated by AMIRA being shared by competitors in the minerals industry because the knowledge is used to benefit the consumers and is available for competitors to access.

Recently in the UK, there has been discussion regarding the dominance of the supermarkets as they affect the farming sector. Competition policy says they should be free to work within market forces and take the farmers to the cleaners. Prices drop short term, the customer gets cheap produce, particularly milk. This is, of course, not in society's interests, and should be prevented. The story goes something like this: Supermarkets pay unrealistically low prices to farmers so that they sell milk for unrealistically low prices. Normally profitable farmer can't make ends meet. Sells land to developer. Developer builds housing estate designed to fall apart in 25 years. Estate turns into slum. Poor education and lack of hope and opportunity lead to increased teenage and unplanned/unwanted pregnancies. Population rises, increasing market for food. Farms have all been sold to developers. Famine ensues. Only rich can afford milk. Charismatic leader gains increased popularity with nationalist workers party. Blames Jews for taking all the milk. Racial tensions increase. Charismatic leader leads regime of terror against the "Other". Leader is voted into Government with a slender 33% of the vote, and promptly abolishes parliament and outlaws opposition parties and the monarchy. Leader annexes Ireland. Invades France. France collaborates. Minority groups are massacred. Uh, where was I going with this? That's right - when supermarkets use competition policy, global attrocities occur; and developers cause great evil.

Restraining anti-competitive practices is important, but sometimes there are more important considerations. There are good reasons for buying fair-trade products or ensuring that suppliers are able to survive as well.


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