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"...public opinion deserves to be respected as well as despised" G.W.F. Hegel, 'Philosophy of Right'

vigorous competition « Previous | |Next »
April 15, 2004

Sometimes I read the Australian Financial Review and shake my head in disbelief. Do they really believe that? My disbelief is usually not with the journalists. They do a good job. They are some of the best in the nation. It is the editorialists I am concerned for. The ones who see moonbeams in the noonday sun.

Today's editorial---'Latham must address reality', is an example (subscription required). I read it whilst having morning coffee at some newfangled coffee bar just around the corner from the apartment. It's where the lawyers hang out and so papers are provided as part of the service. Nobody reads the Financial Review. Tis The Australian that is fashionable. I guess the lawyer types haven't noticed the drop off in quality in the Murdoch stable these last six months. Or maybe they like that "stand up and salute 'em" type of journalism favoured by Murdoch.

The background to the Financial Review editorial is the misuse of market power and the recent Senate Economics References Committee report which unanimously concluded that the Trade Practices Act needs amending to protect small businesses from anti-competitive conduct.

The editorial is mostly about the competitive realities of the marketplace and whether the Trade Practices Act needs to be revised. The editorialist says that the Trade Practices Act is there to protect legitimate competition.

Fair enough. Then we have this paragraph:


"But no one has the right to succeed in business. This is the basis of our system of competitive capitalism. Large firms use their scale and financial power to lower costs and enhance service and product offerings in mature industries such as brewing, groceries, liquor and petrol trading, which is what most consumers want. Those that grow stale, decline and even fail. Small firms need to innovate, preferably in new markets, and to differentiate their products, service marketing or distribution to make inroads. Many--about 8.5 per cent of small foirms each year---fail or give up. Those that survive and prosper usually do so because they have offered something new to the marketplace.That is what Joseph Schumpter called creative destruction."


I read that and I thought about marketplace realities I knew from my brief sojourne in Canberra: Microsoft, Woolworths and Coles, then Telstra. These firms signify the lack of competition, the use of anti-trust legislation, and regulators disciplining them for anti-competitive behaviour. You could say the competitive market was not working as well the Econ. 101 textbooks said it should.

The question is: 'What constitutes acceptable competitive behaviour in the Australian marketplace?" The editorialist says that legitimate competition is unruly, vigorous, even brutal and calculated to damage rivals by winning customers from them. This brutalism is okay because it benefits consumers by delivering lower prices and more quality, range and convenience. Consumer welfare is the touchstone.

What I inferred from this editorial is that the AFR is tacitly defending the market dominance of the duopoly of Woolworths and Coles, by turning aside the need to change section 46 of the Trade Practices Act to give market regulators anti-trust powers. Should not these retailers be busted open?

We cannot have that sort of competition can we? We cannot be too radical in ensuring competition can we? We need to protect the big end of town from competition. There is no need to beef up s. 46 of the Trade Practices Act to provide powerful deterrents against the abuse of market power that harms small business, is there?

Does the Fin. Review actually see vigorous competition when it looks at Woolworths and Coles?

| Posted by Gary Sauer-Thompson at 11:37 AM | | Comments (1)
Comments

Comments

Notice that mention of the ACCC is rare these days since Prof Fels retired?

Competition in telecoms? They are kidding! Try getting your phone fixed if you're with Optus or one of the others. I tried to call Telstra Messagebank the other day on my vodafone mobile without any luck - Telstra tells me I can only check my messages from a Telstra phone yet I pay each month for the MB service!

I noticed yesterday that a new flavour of Twisties has been released at the same price as existing flavours BUT the quantity has been dropped from 5og to 30g.

My major brandname laptop has been returned 5 times now for warranty repair and it takes a month each time.

Try and buy a Playstation or similar that is not priced the same at every retail outlet.

The consumer is being ripped off in every direction because of lack of genuine competition and adequate policing of existing regulations.

I probably slipped a bit off-topic here :-).