Thursday, 4 May 2017

The Commerce Commission should ban itself

 

Here’s a post from February that is relevant again today in the wake of the Commerce Communist Commission’s prohibition of the Fairfax/NZME merger. ACT’s David Seymour calls the Commission a dinosaur, suggesting it had its day once. It’s more like a dangerous man-made virus that should never have been released into the wild at all.

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 now declared the latter two must 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 monopoly that allegedly fights monopolies, a Quango that allegedly “promotes competition”; as if it were possible for bureaucracy to do that, or a bureaucrat to even fathom what competition looks like and how it works in the real world –  as if “competition” itself were a primary, and not the result of the freedom of free people to do deals and make contracts with each other which are the job of governments to enforce.

That enforcement is the real job of government here. Instead, we have a quango enforcing what for them is a floating abstraction –so-called pure and perfect competition – a thing never seen alive in the wild -- so no wonder they can frequently be seen, for example, “enforcing” competition by 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. Such is the nature of bureaucratic enforcement of something they know nothing about. Yet due to their random decision-making all business activity becomes less certain, so by that amount already decreasing the range of options open to consumers – and so making monopolies even more likely, not less.

They are morons given power by idiots.

The idiocy leads to more idiocy. The Communist Commission's draft decision to discourage (in February) and now ban altogther the Fairfax NZME merger on the basis it creates a monopoly saw analysts tell Fairfax that if it doesn’t merge then it must withdraw from NZ, which would of course create the same alleged monopoly over which the Commission is this week wringing its hands. (I say alleged monopoly because the Commission ignores all the other national and international news sources by which New Zealanders may acquire their news now and in the future, many far superior to the superficial offerings of these two fat-headed giants.)

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 is a human right -- and gives existing telcos less competition than would have otherwise been the case, the very reason some of these non-competitive vultures are crowing today: because they can now safely put their prices up.

  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 (where they would face the same capital costs as their competitors) to call for their divestiture;
  • They say they enforce competition, yet they fail to recommend the abolition of legislation (such as the RMA, the OSHA, corporate taxes etc.) that helps prevent small companies being able to compete with big companies;
  • They say they enforce competition, yet in telecommunications especially they penalise the most competitive company and keep less competitive companies alive;
  • 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 their months-long meddling raises investment uncertainty and thus capital costs and hurdles to new investment, so that new services that might benefit consumers are still born, never to see the light of day – and older services, that might have merged in a way that makes them compeittive again, are prohibited from simply trying to stay alive.

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 just like themselves.

They are not a dinosaur, as David Seymour suggests, they are a dangerous man-made virus that should never have been introduced into the wild.

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 the Chicago economics he espoused, a floating, 'Platonic,' idea of competition bearing so little relation to the real world that it needs a bureaucracy with government power to try unsuccessfully to make it happen, damaging all and sundry in the process.

They should prosecute themselves as a predatory monopoly.

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6 comments:

  1. I suspect Seymour feels compelled to say "it once had its place" because he knows it's origins lie in the ACT party.

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  2. The Fairfax/NZME decision is just bizarre. The two companies wanted to merge because neither one is competitive in the current market and they thought a merger would allow them to achieve economies of scale. That fact self-evidently implies that there is plenty of competition in the market and therefore the merger would not have created a monopoly. But then, experience has taught me that even things which are self-evident are not necessarily evident to bureaucrats.

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  3. I have had the misfortune to see the Ministries of Education, Health and Social Development in action. My interpretation of the behaviours within those organisations is as the most naked examples of monopoly behaviour in the country, by some distance. Not in the most-recognised sense of raising prices, but in the real sense of limiting output and reducing quality. These institutions above all look after themselves first, second and third. Above all, they care about their share of the public purse. What gets those institutions motivated is protecting that share from competition or scrutiny. Productivity - delivering services that actually work - is not only uninteresting but dangerous to them, because it threatens to reduce the size of their empires and, therefore, the job security of public servants. Public choice is sometimes seen as cynical but it it is the behaviour, not the theory explaining it, that is cynical and public choice encapsulates the behaviour well. So if the Commerce Commission were at all serious about monopoly losses and consumer welfare it would be demanding the right to investigate those Ministries.

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  4. The reason why it doesnt break up existing monopolies is because it isnt in its legislation. Anyway whats wrong with a referee who can ensure the public interest factor is considered when two companies want to form a dominant group in a particular industry, and by doing so will reduce choice and increase prices for consumers.

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  5. Monopoly is not a verb. I can't respect what you have to 'say' if you can't comprehend basic English.

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