Thursday, 23 February 2017

The Commerce Commission must go

 

So Vodafone and Sky want to merge with each other. And so do Fairfax and NZME.  But the Commerce Commission has ruled the former two may not, and has already declared the latter two should not.

Who is this Communist Commission when it’s at home, and what gives it the right to tell shareholders of major businesses what they should do with their property? I went to their website to find out:

The Commerce Commission [they say] enforces legislation that promotes competition in New Zealand markets and prohibits misleading and deceptive conduct by traders. The Commission also enforces a number of pieces of legislation specific to the telecommunications, dairy and electricity industries. In ensuring compliance with the legislation it enforces, the Commission undertakes investigation and where appropriate takes court action; considers applications for authorisation in relation to anti-competitive behaviour and mergers; and makes regulatory decisions relating to access to telecommunications networks and assessing compliance with performance thresholds by electricity lines businesses.

So we have a Quango that allegedly “promotes competition,” as if it were possible for bureaucracy to do that, or a bureaucrat to understand it –  -- as if “competition” itself were a primary (“enforcing” competition frequently meaning prosecuting for price gouging when prices are too high, for predatory pricing when they’re too low, and for collusion when they’re the same). And in their random decision-making all business activity becomes less certain, so by that amount already decreasing the range of options open to consumers.

The idiocy leads to more idiocy. The Communist Commission's draft decision to discourage the Fairfax NZME merger on the basis it creates a monopoly saw analysts tell Fairfax it must withdraw from NZ if it doesn’t merge, creating the same alleged monopoly.

Meanwhile the Commissars’ determination that that Vodafone and Sky must not merge leaves shareholders in both already poorer, and consumers less able to access the sport the Commissars have decided -- and gives existing telcos less competition than would have otherwise been the case, the reason these vultures are crowing today.

  We should prosecute the Commissars themselves for false advertising:

  • They say they act to prevent monopoly but their actions often encourage it;
  • They say they act to prevent monopoly yet fail to break up government monopolies or call for their divestiture (where they would face the same capital costs as their competitors);
  • They say they enforce competition yet they fail to recommend the abolition of legislation that prevents small companies being able to compete with big companies (the RMA, the OSHA, corporate taxes);
  • They say they enforce competition yet in telecommunications especially they penalise the most competitive company and keep less competitive companies alive through advocating corporate pork policies;
  • They allege to have consumers’ interests at heart yet they delay mergers from which operational synergies can be gained, thereby raising costs, lowering wages and profits and thus further reducing capital accumulation and real wages; and
  • They allege to have consumers’ interests at heart yet they raise investment uncertainty and thus capital costs and investment hurdle rates, such that new services that might benefit consumers are still born, never to see the light of day.

Quite simply, they are the legislative manifestation of the tall-poppy-syndrome - they attack any big private business and do nothing meaningful to the protected positions of bloated, wasteful, bullying government organisations.

The idea that a bureaucrat could command competition sounds like it would be a product of a central planning mindset, yet the Communist Commission was not even a product of Muldoon’s command economy – it was a creation of Roger Douglas, a product of the flawed floating abstraction of 'pure and perfect competition' held by mainstream economics, a floating, 'Platonic,' idea of competition bearing so little relation to the real world that it needs a bureaucracy with government power to issue decrees trying unsuccessfully to make it happen, damaging all and sundry in the process.

They should prosecute themselves as a predatory monopoly.

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2 comments:

  1. Apparently the reason given on the radio just now by the chairman of the commission was sky TVs Rugby exclusive deals could be leave reached into other markets if it was in partnership with Vodafone.

    I thought leverage theories of market power died in the 1980s. They were the first blood extracted by the Chicago School of anti-trust.

    ReplyDelete
  2. Ah the Commerce Commission. That august body that did an industry over to protect the near monopoly that is trademe. They must all have beards in that office - they couldnt look at themselves in the mirror every morning.

    ReplyDelete

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