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Government Isn’t About Protecting Competitors

Supply And DemandStephen King at Core Economics has a corrective for the dinner-party talk on market power and competition:

Competition laws necessarily place restrictions on large firms that have market power. These restrictions are not faced by smaller, less successful businesses. But judging any abuse of market power must be handled very, very carefully. An abuse of market power and tough, pro-competitive behaviour, look very similar. Effective competition hurts competitors – and competitors will complain about it. But the whole point of competition is to undermine your competitors, increase your market share and make more profit. And this is completely legitimate, and indeed highly desirable, if this competition leads businesses to become more efficient, offer superior service or quality to customers, or innovate and sell desirable new products.

Refocusing legal, regulatory and bureaucratic attention on consumer benefits rather than competitors makes perfect sense. Legal language and institutions can shape organisational action. We shouldn’t be protecting competitors, and we shouldn’t be speaking or writing as though we are.

Of course, that is rather difficult when the entire political process is shaped to give the competitors access to policymaking.

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