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Competition Commission and Office for Trading to merge

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Looking through some of my earlier writing I came across an article I wrote for the Institute of Economic Affairs in 2005, concerning the Competition Commission. The title was “Authority: A monopoly running amok in business”. The big issues at that time included Microsoft, and naturally the European Commission got in on the act, insisting that it must unbundle its Media Player from Windows. Microsoft was utterly truthful, if provocative, to suggest that the shorn-of-Media Player edition should be named Windows “Reduced Media Edition” – a name roundly rejected by Authority (yes, Authority had, and still has, the power).

The Competition Commission and the Office of Fair Trading areto be merged next year, creating a fearsome “regulator”. Indeed like most of government creations it will be a monopoly, in business largely to stop other businesses getting together to share economies of scale. The typical litmus test for interventionists is as low as a 25 per cent market share, and let us be clear that despite Authority speak, nattering about “anti-competitive behaviour”, it doesn’t take long to see that the only genuine concern is monopoly.

Furthermore, monopoly is dangerous only when it is owned by government. In any field, mistakes can be made but the market recognises them far faster than does Authority. The NHS is a joke, an enormous organisation (or disorganisation) ranking in the top five of the world’s businesses by size. If it were privatised, it would immediately be broken up and sold into a thousand pieces. Yet governments stick to the notion that government functions should absorb about half of all output, whether by nationalisation or regulation or both.

I am reminded of all this by the recent suggestion that the UK oil companies BP and Shell have been fixing the price of petrol. David Cameron rushed straight into the fray, threatening to extend “criminal offences” if the accusations are true. Whether it turns out to be true (which I doubt) the first action should be to kick out the regulators – with the Office of Fair Trading under scrutiny for reporting earlier this year that the petrol market was “working well”.

Similarly reminiscent is John D Rockefeller’s Standard Oil – the cause of the US anti-trust Act – which had seen its market share fall from 90 per cent to under 20 per cent before the Act became law. Price-cutting was more often started by the minnows in (often successful) attempts to cut into Standard Oil’s market. The manager of one such company remarked later “it is interesting that most of the ex-Standard employees who testified about Standard’s predatory tactics entered the oil business when they left Standard. They also prospered”. 

Look at Authority’s own mammoth industries: the enormous NHS and state education industries are both “free” carrying a nil price-tag. The ultimate in predatory pricing. Yet the competition is significant and it survives. Royal Mail, despite its size and infrastructures, has always needed a legal monopoly to stay afloat and even that hasn’t worked. QED.

Terry Arthur is author of various books including “Crap – A guide to politics”, a Financial Regulation Fellow of the Institute of Economic Affairs and a Fellow of the Adam Smith Institute.

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