|Monopoly pricing- (31.10.03)|
For fair trade regulators one of the key remits of your job is to determine if anti-competitive behaviour has resulted in consumers paying higher prices than they would have otherwise needed to. For some monopolies it is recognised that price competition in itself has social disbenefits. Utilities are an example of where a set price and discrimination between consumers can be positively outlawed. One example in the UK in gas and electricity is the use of prepayment meters that are set at a higher unit cost than direct debit customers, for instance.
So, to what extent can market regulation be driven by the identification of where price competition and price discrimination are absent. Whilst at a national level it may be difficult to make such broad generalisation and wider structural analysis of the market are required, at a local or regional level, it may be easy to identify a lack of price competition compared to another region. Conclusions can then be drawn about localised anti-competitive behaviour that top down regulation does not currently deliver.
There would be some problems to be overcome before introducing such a regime. For instance, a lack of price competition in a local market may just reflect competition for other product features being more important to the consumer. This would include differences in product quality, customer service and store location. However, most competitive markets are dominated mostly be price. In any case, a lack of non-price features to a product market should result in no price differentials in a competitive market. This could be identified as a commodity type market, which would have such features as unbranded goods and an active resale market. In the absence of such features, price competition and discrimination should exist and competition regulators should be expected to act in its absence.