Will greater Competition Regulation put more money in consumers' pockets?

Fair Competition

Yesterday Luke 'Ming' Flanagan explained how savings could be made to the Irish economy by increasing competition regulation. If Ireland could lower its cost base then people could buy more for their money and maintain a greater standard of living. The idea is that eliminating the cartels in Ireland will decrease excessively high prices and make Irish exports more competitive abroad. It will also increase Ireland's attractiveness as a tourist destination.
What do you think?
http://www.youtube.com/watch?v=k34rsT5OQCQ&feature=plcp

Sleepy

It would seem to me that closing all of the various competition quangos would result in greater money in peoples pockets as the reduced government expenditure would result in a lower tax burden...

I'm in no way convinced that increasing regulation does anything to improve competition. Typically, it'd be the opposite.

Fair Competition

Sleepy wrote: »

It would seem to me that closing all of the various competition quangos would result in greater money in peoples pockets as the reduced government expenditure would result in a lower tax burden...

I'm in no way convinced that increasing regulation does anything to improve competition. Typically, it'd be the opposite.

That is quite innaccurate. In the absence of a competition regulator large dominant companies would be free to engage in anticompetitive practices and evict their smaller rivals from the market illegally.

At present Competition regulation in Ireland is a joke and there are countless small to medium sized businesses around the country going bust under the guise of the recession when in many cases their larger competitiors are illegally cross-subsidising in order to evict them from various markets. The large companies then increase the prices once they have eliminated the competition which is to the detriment of consumers and the economy alike. Only greater competition regulation can solve this problem and not less!

BOHtox

Fair Competition wrote: »

That is quite innaccurate. In the absence of a competition regulator large dominant companies would be free to engage in anticompetitive practices and evict their smaller rivals from the market illegally.

Every single monopoly in the history of the state, and I'll guess in the world too, has been funded and kept in existence by the state. Also through high regulation that the companies themselves propose to make set up costs too high to enter the industry. In a free market never has a monopoly existed!
Entry is too easy and someone will always come in at a lower price than what is already on offer

BOHtox

Fair Competition wrote: »

At present Competition regulation in Ireland is a joke and there are countless small to medium sized businesses around the country going bust under the guise of the recession when in many cases their larger competitiors are illegally cross-subsidising in order to evict them from various markets. The large companies then increase the prices once they have eliminated the competition which is to the detriment of consumers and the economy alike. Only greater competition regulation can solve this problem and not less!

This is pretty contradictory. Government regulation is bad to small to medium businesses therefore we need more regulation?

Sleepy

Not inaccurate, just a differing opinion to yours. Currently in Ireland all of the following play a role in competition regulation:

The Competition Authority
National Consumer Agency
National Transport Authority
Commission for Taxi Regulation
Broadcasting Authority of Ireland
Commission for Energy Regulation
Commission for Aviation Regulation
Comreg

That's eight quangos being paid for by the public that I can think of, perhaps there are others with powers in this area? I agree that competition is a desirable thing in the market but do we really need it at the regulation level? I don't see competition here, I see duplication of effort and waste.

We need less competition regulation, not more.

Fair Competition

BOHtox wrote: »

This is pretty contradictory. Government regulation is bad to small to medium businesses therefore we need more regulation?

No, what I am saying is that currently the Competition Authority is not doing its job properly i.e. there is little enforcement of competition regulation. Enforcement of the existing regulations would help SMEs but without the enforcement, effectively we have no regulation.

Cool Mo D

BOHtox wrote: »

Every single monopoly in the history of the state, and I'll guess in the world too, has been funded and kept in existence by the state.

Not true. There are loads of state set-up monopolies, but also plenty of non-state monopolies, like De Beers, Standard Oil, Microsoft, etc.

BOHtox wrote: »

Entry is too easy and someone will always come in at a lower price than what is already on offer

Complete nonsense. Different industries have higher barriers to entry. It is very easy to set up a new online business, but setting up a new commercial bank, or power utility company requires prohibitive amounts of capital, and the giant existing players can easily undercut you until you go under.

Fair Competition

Sleepy wrote: »

Not inaccurate, just a differing opinion to yours. Currently in Ireland all of the following play a role in competition regulation:

The Competition Authority
National Consumer Agency
National Transport Authority
Commission for Taxi Regulation
Broadcasting Authority of Ireland
Commission for Energy Regulation
Commission for Aviation Regulation
Comreg

That's eight quangos being paid for by the public that I can think of, perhaps there are others with powers in this area? I agree that competition is a desirable thing in the market but do we really need it at the regulation level? I don't see competition here, I see duplication of effort and waste.

We need less competition regulation, not more.

Let me clarify, we need proper enforcement of the existing regulation and I am refering specifically to articles 4 and 5 of the Competition Act 2002 and articles 101 and 102 of the EU Treaty. They both fall under the remit of the Competition Authority.

Fair Competition

Fair Competition wrote: »

That is quite innaccurate. In the absence of a competition regulator large dominant companies would be free to engage in anticompetitive practices and evict their smaller rivals from the market illegally.

At present Competition regulation in Ireland is a joke and there are countless small to medium sized businesses around the country going bust under the guise of the recession when in many cases their larger competitiors are illegally cross-subsidising in order to evict them from various markets. The large companies then increase the prices once they have eliminated the competition which is to the detriment of consumers and the economy alike. Only greater competition regulation can solve this problem and not less!

Sounds like you're for taking money out of people's pockets. If someone wants to do something cheaper (Lidl, Aldi spring to mind), that's what's good for consumers.

Fair Competition

Rojomcdojo wrote: »

Sounds like you're for taking money out of people's pockets. If someone wants to do something cheaper (Lidl, Aldi spring to mind), that's what's good for consumers.

I am not talking about Lidl or Aldi, I am talking about companies who have a large dominant position in the market i.e. >50% market share and who abuse that position to specifically eliminate their rivals with the view to increasing prices once the competition has been put out of business. In the long run that is bad for consumers.

Also in many instances customers who choose short term gain over long term pain regret their actions when they are left with only one supplier who can charge what it wants.

Fair Competition

Fair Competition wrote: »

I am not talking about Lidl or Aldi, I am talking about companies who have a large dominant position in the market i.e. >50% market share and who abuse that position to specifically eliminate their rivals with the view to increasing prices once the competition has been put out of business. In the long run that is bad for consumers.

Also in many instances customers who choose short term gain over long term pain regret their actions when they are left with only one supplier who can charge what it wants.

But the "increasing the price once the competition has been eliminated" part is just a bit you're inventing and sticking on at the end. What if they are just able to offer a cheaper product?

andrew

Competition is pretty much always a good thing, and in some areas there is a lack of competition, but I'm not sure I buy the idea that the cost of living in Ireland is high for want of competition. Ireland's inflation rate was quite high during the boom, but that's something which happens during booms anyway; higher than normal economic growth will always cause inflation. The only industry I can think of that shouldn't be regulated/should be more competitive is the taxi industry; there should be no limit on the number of taxis anywhere ever. And the government should sell it's stake in any private enterprise it owns; but are there really many of those left at this stage?

Fair Competition

Rojomcdojo wrote: »

But the "increasing the price once the competition has been eliminated" part is just a bit you're inventing and sticking on at the end. What if they are just able to offer a cheaper product?

If they are able to offer a product more efficiently and at a lower price that's great and fair play to them. What I am talking about is when companies abuse their position of dominance i.e. sell below average variable cost (AVC) with the explicit aim of eliminating their rivals and then increasing the price. Also I am talking about industires where there are barriers to entry.

Fair Competition

andrew wrote: »

Competition is pretty much always a good thing, and in some areas there is a lack of competition, but I'm not sure I buy the idea that the cost of living in Ireland is high for want of competition. Ireland's inflation rate was quite high during the boom, but that's something which happens during booms anyway; higher than normal economic growth will always cause inflation.

Cartels in Ireland have artificially inflated the price of goods and services in both the recession and boom. Inflation is different from an artifically maintained price equilibrium which has at its core an anticompetitive effect.

andrew

Fair Competition wrote: »

Cartels in Ireland have artificially inflated the price of goods and services in both the recession and boom. Inflation is different from an artifically maintained price equilibrium which has at its core an anticompetitive effect.

What I'm wondering though, is which cartels? which products? It's just it seemed to me as though Ming made the jump from 'things are generally expensive here' to 'there must be many cartels operating here.' The only thing he mentioned was drug prices, and drug prices in general seem to be a clusterfuck of different regulations and incentives.

Fair Competition

andrew wrote: »

What I'm wondering though, is which cartels? which products? It's just it seemed to me as though Ming made the jump from 'things are generally expensive here' to 'there must be many cartels operating here.' The only thing he mentioned was drug prices, and drug prices in general seem to be a clusterfuck of different regulations and incentives.

The cement and concrete cartel is probably the most obvious. It is headed up by CRH, who have been found guilty of operating cartels in other juridictions. See below link to Shane Ross' speach in Dail about CRH and the cartel.

http://www.youtube.com/watch?v=obw6G-sSnMI

Many other prominent figures have spoke out about it.

Also, there is evidence to suggest that cartels are operating in the markets for ink, home heating oil, petrol / deisel, liquid milk, bread, health insurance, alcohol etc... the list goes on.

Unfortunetely the Competition Authority is either unwilling or unable to carry out its function and this is costing Irish consumers billions each year. Dr. John Fingleton estimated €4 billion annually. That's €2,400 per household each year!

andrew

Fair Competition wrote: »

The cement and concrete cartel is probably the most obvious. It is headed up by CRH, who have been found guilty of operating cartels in other juridictions. See below link to Shane Ross' speach in Dail about CRH and the cartel.

http://www.youtube.com/watch?v=obw6G-sSnMI

Many other prominent figures have spoke out about it.

Also, there is evidence to suggest that cartels are operating in the markets for ink, home heating oil, petrol / deisel, liquid milk, bread, health insurance, alcohol etc... the list goes on.

Unfortunetely the Competition Authority is either unwilling or unable to carry out its function and this is costing Irish consumers billions each year. Dr. John Fingleton estimated €4 billion annually. That's €2,400 per household each year!

Some of those sound a bit implausible (though I'm not denying that some do exist). Alcohol's price is taxed a lot, and you need a license to sell it, so that's not a cartel so much as government pricing. The bread and milk thing again seems like it might have something to do with agricultural policies which affect the price of agricultural products in the EU (though I'm not sure how the CAP works any more). And ink can be bought for cheap if you refill a cartridge; in addition, printer ink isn't expensive because the companies which make it collude, it's expensive because that's the pricing structure which makes the most sense for the pricing industry. I don't know enough about health insurance to comment, but I do remember hearing something about newer companies being forced to subsidise the VHI or something?


Anyway, my point is that I'm not sure cartels are to blame. I think one of the biggest impediments is possibly negative government intervention rather than cartels, which is much harder to combat. So i agree that there's not enough free competition, I just don't think cartels are the main source, and if they are, it's because of active government regulation.

johnnyskeleton

Generally speaking, Irish competition regulation involves not so much taking steps to facilitate more open competition between companies as it does deciding who is making too much money and trying to reduce the money they make.

In Irish eyes, large profit = anti competitive. If I can paint 100 houses at 100 each in the same time as someone else paints 20 houses at 200 each, I will be considereto be anti competitive as I make "too much money". Likewise, if I can paint such beautiful paintings that someone will pay me 10,000 a go, that is also seen as anti-competitive because I don't "deserve" that for the work I do.

So I agree with you fully about the prinicple of regulation, I just think until people learn that competitiveness begins at home ie vote with your wallet, then government iterventions can often cause more trouble by, as already pointed out, increasing the cost to companies (which disproportionately affects new entrants).

KyussBishop

Standard Oil is a pretty archetypal example of a monopoly, which occurred in a fairly free and unregulated market.

Another example more relevant to Ireland, from another thread: If we get rid of ComReg tomorrow, Eircom would be free to kick all other ISP's off their infrastructure, and most of the country (bar parts of Dublin with competitors like UPC who have their own infrastructure) would have to go with Eircom.


Without adequate competition regulation, markets become subject to a Gresham's Dynamic, where dishonest (fraudulent, corrupt) business spreads and eventually pushes honest players out the market, leaving only the dishonest business behind.

You can almost take your pick from any recent widespread financial scandals and see such a dynamic at work, such as LIBOR and Barclay's stated reason for fradulently manipulating that, being that their borrowing costs were previously higher compared to other banks that were manipulating it.


The primary method by which deregulation gets rid of fraud, is by removing any legal definition for fraud/crime, it (and the free markets myth) do not solve the inherent problems of immoral/fraudulent actions, or their consequences, they just semantically erase any definition of them and let the immoral actions persist.
It's always asserted that deregulation and the free markets will solve it, but those assertions are never qualified, just stated as-is.


Some excellent examples above, of potential cartels which may perpetuate such a Greshams dynamic in Ireland.

BOHtox

Cool Mo D wrote: »

Not true. There are loads of state set-up monopolies, but also plenty of non-state monopolies, like De Beers, Standard Oil, Microsoft, etc.

Standard Oil isn't a company anymore. I think this is a Milton Friedman quote, it is on wikipedia anyway, "The De Beers diamond monopoly is the only one we know of that appears to have succeeded (and even De Beers are protected by various laws against so called "illicit" diamond trade)"
and Microsoft were fined for anti-competitive practices.

Cool Mo D wrote: »

Complete nonsense. Different industries have higher barriers to entry. It is very easy to set up a new online business, but setting up a new commercial bank, or power utility company requires prohibitive amounts of capital, and the giant existing players can easily undercut you until you go under.

It does but these entry requirements can be met. That's why there is more than one energy company and bank.

Fair Competition

andrew wrote: »

Some of those sound a bit implausible (though I'm not denying that some do exist). Alcohol's price is taxed a lot, and you need a license to sell it, so that's not a cartel so much as government pricing. The bread and milk thing again seems like it might have something to do with agricultural policies which affect the price of agricultural products in the EU (though I'm not sure how the CAP works any more). And ink can be bought for cheap if you refill a cartridge; in addition, printer ink isn't expensive because the companies which make it collude, it's expensive because that's the pricing structure which makes the most sense for the pricing industry. I don't know enough about health insurance to comment, but I do remember hearing something about newer companies being forced to subsidise the VHI or something?


Anyway, my point is that I'm not sure cartels are to blame. I think one of the biggest impediments is possibly negative government intervention rather than cartels, which is much harder to combat. So i agree that there's not enough free competition, I just don't think cartels are the main source, and if they are, it's because of active government regulation.

Cartels are rife in this country and the fact that not many have been unearthed in Ireland does not mean they do not exist. See the links below to cartels which were uncovered in the above named industries in either Ireland or other jurisdictions.

Irish Concrete cartel - http://www.youtube.com/watch?v=MbaskBTCmKE

Alcohol (Dutch beer cartel) - http://europa.eu/rapid/pressReleasesAction.do?reference=IP/07/509&format=HTML&aged=0&language=EN&guiLanguage=en

Luxembourg brewers cartel -http://europa.eu/rapid/pressReleasesAction.do?reference=IP/01/1740&format=HTML&aged=0&language=EN&guiLanguage=en

Irish Bread market - http://www.newsscoops.org/?p=961

Irish Milk market - http://www.irishexaminer.com/ireland/kfojeyojgbmh/rss2/

Irish home heating oil cartel - http://www.independent.ie/national-news/home-heating-oil-firms-admit-part-in-price-cartel-104620.html

European Banana cartel - http://europa.eu/rapid/pressReleasesAction.do?reference=IP/11/1186&format=HTML&aged=0&language=EN&guiLanguage=en


Bitumin Cartel (bitumin is the product used to make tarmac) - http://europa.eu/rapid/pressReleasesAction.do?reference=IP/07/1438&format=HTML&aged=0&language=EN&guiLanguage=en

These are just a sample of many industries where cartels are/were operating. Cartels are a real and present danger to the Irish economy as they steal from consumers. The sooner the general public realise this the better.

Suryavarman

Cool Mo D wrote: »

Not true. There are loads of state set-up monopolies, but also plenty of non-state monopolies, like De Beers, Standard Oil, Microsoft, etc.

De Beers - has a long history of entering into partnerships with Governments that nationalise the nations mines.

Standard Oil - Was never a monopoly and it's market share was shrinking rapidly by the time Government took action against it's large market share.

Microsoft - Was never a monopoly and it only has such a large market share because of the incompetence of its competitors.

KyussBishop

Suryavarman: Your definition of monopoly is so strict though, that it is completely removed from any legal or practical definition of monopoly.
It's like what I described in my previous post, regarding deregulation getting rid of crime/fraud: It 'gets rid' of it by removing any legal definition of it (it's a semantics game basically).

Past discussion on this, where I argue against that strict definition, and also argue how Standard Oil is a monopoly:
https://www.boards.ie/vbulletin/showpost.php?p=78397606&postcount=228

It's a very long post, touching on a lot of unrelated topics, but the discussion in the context of this thread are the quotes at the start relating to monopoly/Standard Oil, and then bottom quotes on Standard Oil; the bottom quotes in particular, from the actual court case against Standard Oil, show pretty comprehensively that it was a monopoly.

Microsoft was also addressed in that thread as well, and its massive fines under anti-trust cases speak for themselves.

Farmer Pudsey

Farmers protest outside meat factories this is anti compeditive ,competition authority will have their people outside these factories and take farmers and their farm leaders to court.

Price of beef raising world wide, wet summer in Ireland, All meat factories drop the price of cattle at the same time.

Where is the competition authority.

And one last Quote

Topaz

Suryavarman

KyussBishop wrote: »

Suryavarman: Your definition of monopoly is so strict though, that it is completely removed from any legal or practical definition of monopoly.
It's like what I described in my previous post, regarding deregulation getting rid of crime/fraud: It 'gets rid' of it by removing any legal definition of it (it's a semantics game basically).

Past discussion on this, where I argue against that strict definition, and also argue how Standard Oil is a monopoly:
https://www.boards.ie/vbulletin/showpost.php?p=78397606&postcount=228

It's a very long post, touching on a lot of unrelated topics, but the discussion in the context of this thread are the quotes at the start relating to monopoly/Standard Oil, and then bottom quotes on Standard Oil; the bottom quotes in particular, from the actual court case against Standard Oil, show pretty comprehensively that it was a monopoly.

Microsoft was also addressed in that thread as well, and its massive fines under anti-trust cases speak for themselves.

It's probably best for both of us if we don't repeat the same points from that argument

I believe that it is correct to define monopoly using the derivation of the word and/or an economists definition. You believe it is right to use the definition that is contained in legislation. We both have our reasons for each and I doubt either of us is going to change the other's mind.

As for the examples, we've gone through this argument before and there's no point going through it again unless either of us have new points worth debating.

KyussBishop

Suryavarman wrote: »

It's probably best for both of us if we don't repeat the same points from that argument

I believe that it is correct to define monopoly using the derivation of the word and/or an economists definition. You believe it is right to use the definition that is contained in legislation. We both have our reasons for each and I doubt either of us is going to change the other's mind.

As for the examples, we've gone through this argument before and there's no point going through it again unless either of us have new points worth debating.

Well I'm not so sure it's certainly worth pointing out (for the purpose of this thread), that with such a strict interpretation of monopoly (one that nobody else subscribes to), it basically precludes rational discussion on anti-competitive laws (since the only monopoly it acknowledges, is a perfect 100% monopoly by government).

It's not really possible to discuss the topic with that definition, because when you are discussing monopolies and anti-trust laws, you are literally talking about something completely different to everyone else.


To give everyone else an idea of how strict the interpretation is (using my example from the other thread):
A single oil company outputting 1 million barrels a day, with only one competitor putting out 1 barrel a day, would not have a monopoly (simply because it is not a perfect 100% monopoly).

whiskey_bar

andrew wrote: »

What I'm wondering though, is which cartels? which products? It's just it seemed to me as though Ming made the jump from 'things are generally expensive here' to 'there must be many cartels operating here.' The only thing he mentioned was drug prices, and drug prices in general seem to be a clusterfuck of different regulations and incentives.

one of the most obvious cartels which comes to mind is the GP sector , completley sheltered and numbers practicing capped

Fair Competition

Farmer Pudsey wrote: »

Farmers protest outside meat factories this is anti compeditive ,competition authority will have their people outside these factories and take farmers and their farm leaders to court.

Price of beef raising world wide, wet summer in Ireland, All meat factories drop the price of cattle at the same time.

Where is the competition authority.

And one last Quote

Topaz

Farmer Pudsey,could I suggest that perhaps the IFA is not serving its members in the bestpossible way. Most inputs into the farming sector are cartelised and farmersare merely passing on where possible, artificially high prices to consumers viaTesco, Lidl. Aldi, Spar, Centra etc. Sometimes it is not possible for farmersto pass on the overcharges.


Key ingredientsto farming such as ground limestone (essential fertiliser), superfine limestone(used as fillers in fertiliser and animal feedstuffs), cement, concrete,crushed stone (used in farm roads and farm buildings) are cartelised. Thetraditional structure of the farm machinery and market for parts are suggestiveof cartel behaviour and findings of cartel activity have also been made in theoil distribution sector.


The Government,Competition Authority and the several other regulators know about the illegalcartels that are forcing up the price of farm produce but refuse to enforceboth Irish and European Law. Incredibly, the IFA appear to continually turn ablind eye to these practises that are perpetrated against its members.Sometimes, long established representative bodies lose sight of themselves andof the reasons for their very existence and the focus switches to pay,benefits, pensions of the full time administrators.

Farmer Pudsey

Fair Competition wrote: »

Farmer Pudsey,could I suggest that perhaps the IFA is not serving its members in the bestpossible way. Most inputs into the farming sector are cartelised and farmersare merely passing on where possible, artificially high prices to consumers viaTesco, Lidl. Aldi, Spar, Centra etc. Sometimes it is not possible for farmersto pass on the overcharges.


Key ingredientsto farming such as ground limestone (essential fertiliser), superfine limestone(used as fillers in fertiliser and animal feedstuffs), cement, concrete,crushed stone (used in farm roads and farm buildings) are cartelised. Thetraditional structure of the farm machinery and market for parts are suggestiveof cartel behaviour and findings of cartel activity have also been made in theoil distribution sector.


The Government,Competition Authority and the several other regulators know about the illegalcartels that are forcing up the price of farm produce but refuse to enforceboth Irish and European Law. Incredibly, the IFA appear to continually turn ablind eye to these practises that are perpetrated against its members.Sometimes, long established representative bodies lose sight of themselves andof the reasons for their very existence and the focus switches to pay,benefits, pensions of the full time administrators.

Irish farmers recieve the lowest prices in the EU ( except for some of the former eastern block states) for there produce wheather it beef, chicken, milk, cereals,pork and bacon with the exception of lamb where british farmers are paid less. So I do not know where you get the idea that we are passing on higher prices to supermarkets,

If these products are cartelised as you say the competition authority are doing SFA about it and have done nothing about it for the last 10 years.

Like I said a farmer protest outside a meat factory the competiontion raid the IFA offices (I am not a huge fan of them). Meat factories drop the price of cattle by about 15% below EU prices togeather over 3-4 weeks where is the competition authority

The Tree of Liberty

Sleepy wrote: »

It would seem to me that closing all of the various competition quangos would result in greater money in peoples pockets as the reduced government expenditure would result in a lower tax burden...

I'm in no way convinced that increasing regulation does anything to improve competition. Typically, it'd be the opposite.

I agree, in general regulation imposes more costs on business and quite often also spawns unnecessary regulation as civil servants appointed to oversee the regulation introduce more than could be considered necessary in order to justify their existence.