Saturday, March 13, 2010

Why Competition Can Be Anti-Competitive

The private sector is often praised because it is about choice. This is because capitalism encourages enterprise and competition. The problem is, it's in the nature of competition to want to wipe out your competitors. Hence the need to control the free market through mechanisms like the Monopolies Commission.

I sympathise with media companies who cannot gain traction because of Sky and BBC's dominance. Businesses like our shop find Google's virtual monopoly of search presents a problem because if we want our website to be found, we have to play by Google rules or not play at all. State monopolies are even worse as we saw in the moribund communist economies of cold war period. Even cuddly John Lewis with their third way model of employee ownership make life difficult for smaller retailers (and which shops aren't smaller than them?) because of the way they stamp on any competition by always matching prices.

The difficulty of dealing with a monopoly reminds me of the time my wife and I stayed in the Everglades. We were miles from any other habitation and there was one restaurant. Our lunch was close to inedible so we complained vociferously, "That meal was awful." Followed quickly by "Table for two for tonight please."

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