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This site may, in fact always will contain images and information likely to cause consternation, conniptions, distress, along with moderate to severe bedwetting among statists, wimps, wusses, politicians, lefties, green fascists, and creatures of the state who can't bear the thought of anything that disagrees with their jaded view of the world.

Nov 10, 2009

Barnaby’s myth of “duopoly."

Cartoon; Not sure of the source, but anybody who has had to deal with government will identify with this.

I ruffled a few feathers on a website on a post by Senator Barnaby Joyce, “A Tale of Two Shops,” which he began with, “Where will Australia draw the line on what share of the market place the major retailers should have?” Generally I contend that in a competitive market place there is no room for the state to start dictating market share, the consumers will do that for you.

However Barnaby’s myth of an overpowering “duopoly” is still popular as can be seen in the “Courier Mail” today:

But University of NSW associate professor Frank Zumbo said comparing costs over 10 years eliminated variables such as currency movements or transport costs and exposed the country's "cosy" supermarket duopoly as the main reason.

"It is our market concentration which explains why our grocery prices are rising faster," he said.

Professor Zumbo said Coles and Woolworth’s had a combined market share of about 80 per cent.

While saner voices elsewhere are looking to other reasons such as actual government barriers to competition, often found in local government planning laws, drought and so on, the existence of Coles and Woolworth’s seem to be getting the most attention. Interestingly nobody has pointed to the inflationary effect of the diversion of hundreds of thousands of tons of foodstuffs into ethanol production at the behest of the state.

Recently on the SBS Insight program, “Going Shopping,” this issue was debated and some aspects of anti-competitive government were brought out by Graeme Samuel, Chairman of the ACCC and Craig Emerson, the Minister for small business. The transcript appears here, and seems reasonably complete although there was an item I don’t seem able to find.

Some of the more interesting comments were as follows:

GRAEME SAMUEL: No, it's not. What becomes of concern to us is if there are barriers to entry or expansion by other players. For example, until recently, there was a major barrier to expansion by the IGA group, by Franklins, by Aldi, indeed by Cosco in terms of locating site where they can open stores. Aldi has 200 stores in Australia, it says it wants to expand to 700 stores which is about the equivalent of what Coles and Woolworth’s have.

CRAIG EMERSON: …. But when you have such restrictions such as centers policy, which basically say the only place you can set up a retail outlet is in a big shopping centre and it's against the law to take on that competition anywhere else, that is anti-competitive. The effect of those laws is that it may be that it's Coles or Woolies who get into the major centers. Others want to take them on somewhere else where they don't want to pay the big rent and can't because it's against the law. Then you get people objecting to someone saying "I want to set up and provide some competition against a big guy or another guy or another girl" and they are not allowed to. I think that's very, very outdated and we should seek to free that up.

CRAIG EMERSON: Anti-competitive elements in the zoning laws. That is where people use the zoning laws, sometimes very frivolously to just object and object and object. This could be bigger players or smaller players, jam the system up. Some one might be saying I want to set up and take on this other outlet and they can't because it goes to court, there are appeals and it goes on and on. It is all nothing to do with amenity, with traffic management. It's all designed about someone who is there, saying, "I don't want competition". Who loses out of that? Consumers.

In other words while the government and the press blame the two main retailers in the country for the lack of competition it is mainly caused by the difficulties caused to potential competitors by their own idiotic interference in the market. The answer is not more regulation, the answer is for them to get the hell out of the way and let natural market forces sort the whole mess out.

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