"A little economics is a dangerous thing."
From MIT's emeritus professor Franklin Fisher "Diagnosing Monopoly" Quarterly Review of Economics and Business, 1979.
Showing posts with label Antitrust. Show all posts
Showing posts with label Antitrust. Show all posts
Friday, September 18, 2009
Thursday, August 07, 2008
Best Conclusion I Have So Far Today
And doesn't the fact that Hong Kong's made it this far without antitrust give you a moment's pause about the domestic benefits of these laws?
More here.
More here.
Monday, May 12, 2008
Books on Antitrust
A good friend of mine, Ming, asked me to recommend a couple of books on the topic of Antitrust. Here's my list:
For Antitrust Law in General
1) Dick Ponser, Antitrust Law, 2nd edition, U of Chicago Press.
2) Herbert Hovenkamp, The Antitrust Enterprise: Principle and Execution, Harvard U Press.
3) Bob Bork, The Antitrust Paradox, Free Press. A bit dated, but still the book to go to for standard reference.
4) Massimo Motto, Competition Policy: Theory and Practice, Cambridge U Press.
5) Keith Hylton, Antitrust Law: Economic Theory and Common Law Evolution, Cambridge U Press.
For Public Choice Perspective
6) Bill Shughart, Antitrust Policy and Interest Group Politics, Quorum Press.
7) Fred McChesney and Bill Shughart edited, The Causes and Consequences of Antitrust: The Public Choice Perspective, U of Chicago Press.
For Austrian Perspective
8) Dominick Armentano, Antitrust and Monopoly, Independent Institute.
For Textbook Treatment
9) Roger Sherman, Market Regulation, Addison Wesley.
10) Roger Blair etal. Antitrust Economics, Oxford U Press.
For Antitrust Law in General
1) Dick Ponser, Antitrust Law, 2nd edition, U of Chicago Press.
2) Herbert Hovenkamp, The Antitrust Enterprise: Principle and Execution, Harvard U Press.
3) Bob Bork, The Antitrust Paradox, Free Press. A bit dated, but still the book to go to for standard reference.
4) Massimo Motto, Competition Policy: Theory and Practice, Cambridge U Press.
5) Keith Hylton, Antitrust Law: Economic Theory and Common Law Evolution, Cambridge U Press.
For Public Choice Perspective
6) Bill Shughart, Antitrust Policy and Interest Group Politics, Quorum Press.
7) Fred McChesney and Bill Shughart edited, The Causes and Consequences of Antitrust: The Public Choice Perspective, U of Chicago Press.
For Austrian Perspective
8) Dominick Armentano, Antitrust and Monopoly, Independent Institute.
For Textbook Treatment
9) Roger Sherman, Market Regulation, Addison Wesley.
10) Roger Blair etal. Antitrust Economics, Oxford U Press.
Thursday, April 24, 2008
Armen Alchian and Hong Kong Judges' Economic Training
Any Alchian student or fan knows that Armen also had a heavy influence in the training of judges and lawyers through the George Mason Law and Economics Center Program started by Henry Manne. In an important antitrust policy speech, former FTC Chairman Timothy Muris articulates a sentiment I’ve heard repeatedly from those who went through the program or watched Armen teach:
Armen Alchian was unexcelled in teaching economics to lawyers. He often presented economics socratically - a technique familiar to lawyers. For years Armen was one of the most popular instructors in Henry Manne’s programs for teaching economics to lawyers. In short courses, he taught literally hundreds of federal judges and law professors.
Armen Alchian was unexcelled in teaching economics to lawyers. He often presented economics socratically - a technique familiar to lawyers. For years Armen was one of the most popular instructors in Henry Manne’s programs for teaching economics to lawyers. In short courses, he taught literally hundreds of federal judges and law professors.
That's from Josh Wright, a student of both Ben Klein and Armen and now at George Mason University Law School himself on Armen's 94th birthday. Read more here.
Now that HK is contemplating to have a competition law, I am really curious about the ability of HK judges ability in deciding cases involving some serious econometrics, price theory, game theory and what not. That makes me worried.
May be HK should considering hiring someone like Armen, Demsetz or Josh to offer some economics crashcourses for the local judges?
Wednesday, October 17, 2007
Best Journal Article I Have Read Today
"As it is, it is one of the great paradoxes of economic science that every act of competition on the part of a businessman is evidence, in economic theory, of some degree of monopoly power, while the concepts of monopoly and perfect competition have this important common feature: both are situations in which the possibility of any competitive behaviour has been ruled out by definition."
From Paul J McNulty, Economic Theory and the Meaning of Competition, Quarterly Journal of Economics, 1968.
From Paul J McNulty, Economic Theory and the Meaning of Competition, Quarterly Journal of Economics, 1968.
Thursday, September 20, 2007
When Supercrunchers Meet Antitrust
I am almost done with reading the fantastic book Supercrunchers, and here are some of my thoughts:
1) In the early days, if you want a suit, you go to the nearby tailor to get one tailored made for you. Boom, with technological advances come pre-made suits that come with all sizes. You just go to a nearby department store and pick the one that fits. Now with supercrunchers, it comes full circle once again where you have services and goods pre-selected and pre-packaged to serve individual needs.
2) But what interests me more is the possibility to pursue perfect price discrimination with the advent of supercrunchers. With that, it completely transforms the monopoly problem from one of efficiency to one of equity. The traditional textbook type argument for why monopoly is bad is because the firm will produce stuff at a level where price exceeds marginal cost. That is an efficiency argument. You cannot use that type of argument anymore now that perfect price discrimination is feasible. Distribution of gains between the producer and customer becomes the only relevant issue under such circumstances. What is interesting to see is whether the prevalence of perfect price discrimination will render it necessary to change at least part of the antitrust law
1) In the early days, if you want a suit, you go to the nearby tailor to get one tailored made for you. Boom, with technological advances come pre-made suits that come with all sizes. You just go to a nearby department store and pick the one that fits. Now with supercrunchers, it comes full circle once again where you have services and goods pre-selected and pre-packaged to serve individual needs.
2) But what interests me more is the possibility to pursue perfect price discrimination with the advent of supercrunchers. With that, it completely transforms the monopoly problem from one of efficiency to one of equity. The traditional textbook type argument for why monopoly is bad is because the firm will produce stuff at a level where price exceeds marginal cost. That is an efficiency argument. You cannot use that type of argument anymore now that perfect price discrimination is feasible. Distribution of gains between the producer and customer becomes the only relevant issue under such circumstances. What is interesting to see is whether the prevalence of perfect price discrimination will render it necessary to change at least part of the antitrust law
Best Line I Have Read Today
[T]he United States protects competition, not competitors. Read more here.
Wednesday, September 05, 2007
Antitrust Law -- Chinese Style
After a long gestation period, China has finally got its own antitrust law, here (sorry folks, in Chinese only) is a commentary by Citibank's China economist Shen Minggao who previously taught at Peking University and got his Ph.D. in economics from Stanford University.
Bottom line:
《反垄断法》明确将“国有经济占控制地位的关系国民经济命脉和国家安全的行业”排除在反垄断范围之外。这一特例相当于通过法律的形式确定了国有企业垄断的合法性。与市场经济国家的反垄断法不同，国家安全一般是针对外资并购而言的，而在中国，非国有企业也受到了与外资企业同等的待遇。 由于法律没有规定哪些行业属于关系国民经济命脉和国家安全的行业，事实上存在着这样的可能性，即凡目前国有占控制地位的行业都属于需要保护的行业。
A one line summary: Existing privileges enjoyed by SOEs are exempted from the law.
Bottom line:
《反垄断法》明确将“国有经济占控制地位的关系国民经济命脉和国家安全的行业”排除在反垄断范围之外。这一特例相当于通过法律的形式确定了国有企业垄断的合法性。与市场经济国家的反垄断法不同，国家安全一般是针对外资并购而言的，而在中国，非国有企业也受到了与外资企业同等的待遇。 由于法律没有规定哪些行业属于关系国民经济命脉和国家安全的行业，事实上存在着这样的可能性，即凡目前国有占控制地位的行业都属于需要保护的行业。
A one line summary: Existing privileges enjoyed by SOEs are exempted from the law.
Monday, July 09, 2007
Two-sided Markets
In "Two-Sided Markets: A Progress Report," Rochet and Tirole explained the thinking behind the bourgeoning literature as of the end of 2005. "Getting the two sides on board" might be a useful characterization, but it didn't go nearly far enough. "We define a two-sided market as one in which the volume of transactions between end-users depends on the structure and not only on the overall level of the fees charged by the platform."
The two sides' willingness to trade depends on the policies of the platform; its membership (or fixed) fees get them into the tent; its usage (variable) fees condition their enthusiasm once they are there. A favorite example: dating bars, which charge men a stiff fee and let women in for free, making money on the sale of drinks. But in fact the model illuminates matchmaking in everything from portals such as Google and Yahoo, TV networks and newspapers (in which "eyeballs" are the stock-in-trade) to mobile phone networks, personal computers, credit cards and videogames (in which more sophisticated commodities are marketed).
That is from a book review of Catalyst Code, read more here.
The two sides' willingness to trade depends on the policies of the platform; its membership (or fixed) fees get them into the tent; its usage (variable) fees condition their enthusiasm once they are there. A favorite example: dating bars, which charge men a stiff fee and let women in for free, making money on the sale of drinks. But in fact the model illuminates matchmaking in everything from portals such as Google and Yahoo, TV networks and newspapers (in which "eyeballs" are the stock-in-trade) to mobile phone networks, personal computers, credit cards and videogames (in which more sophisticated commodities are marketed).
That is from a book review of Catalyst Code, read more here.
Saturday, June 30, 2007
Resale Price Maintainence, Per Se Illegal No More
In the US, that is. Here is the link in NYT. HT to Arnold Kling at the Econlog for the pointer.
BTW, the evidence of liberal bias in media is obvious in this line taken from the story:
The new rule is considerably more favorable to defendants.
A classical liberal type writer would say:
The new rule helps prevent the government from inflicting harm on efficiency-enhancing business practices.
Wondering what HK competition law's stance towards RPM would be, we would know soon.
BTW, the evidence of liberal bias in media is obvious in this line taken from the story:
The new rule is considerably more favorable to defendants.
A classical liberal type writer would say:
The new rule helps prevent the government from inflicting harm on efficiency-enhancing business practices.
Wondering what HK competition law's stance towards RPM would be, we would know soon.
Friday, June 22, 2007
Chicago Influence on Antitrust
Justice Stevens, writing for the majority, simply relied on the age of the relevant precedents: "It is far too late in the history of our antitrust jurisprudence to question the proposition that certain tying arrangements pose an acceptable risk of stifling competition and are therefore unreasonable per se."
To an economist, this echoes the medieval preference for Aristotle over experiment based on Aristotle's antiquity.
That is from Richard Schmalensee's Thoughts on the Chicago Legacy in the U.S. Antitrust.
Richard is of course the Dean of MIT's Sloan School of Management.
Here is Richard's new book coauthored with David Evans. I got it at HK's Commercial Press bookstore in Causeway.
To an economist, this echoes the medieval preference for Aristotle over experiment based on Aristotle's antiquity.
That is from Richard Schmalensee's Thoughts on the Chicago Legacy in the U.S. Antitrust.
Richard is of course the Dean of MIT's Sloan School of Management.
Here is Richard's new book coauthored with David Evans. I got it at HK's Commercial Press bookstore in Causeway.
Tuesday, June 19, 2007
HK Needs Better Competition Law Lawyers, NOW
Peter McMillan up at HK Competition Law brings my attention to a submission made by the HK Law Society in response to the government's consultation on whether HK needs a competition law conducted earlier.
I am particularly disturbed by the writer's lack of understanding of basic industrial organization theory. For example, the author argued that the MTR and KCR merger is OK although it would reduce competition after the merger as long as lower prices are expected post merger.
1) first of all, let's get the facts right. MTR (HK's underground railway) and KCR are pretty much STATE-OWNED ENTERPRISE though the former has a bit of shares listed on the HK stock exchange. Check this out. The government own's over 75% of the listed MTR and the KCR is a plain vanilla SOE, period.
So the reason why you get lower prices after merger (which reduces competition) is that it is a political decision, not an economic one.
2) Failing to see this, the author, or whoever is writing the submission for the Law Society, misapplied the efficency argument as espoused by UC Berkeley economist and one of the pioneer of the New Institution Economics Oliver Williamson which claims that sometimes merger which reduces competition might be a good thing because of improved production efficiency (an increase in producer surplus if you really insist on technical jargon). But the Willamsonian tradeoff as it is known in the literature does entail a RISE IN PRICES, NOT LOWERED ONES post merger. Otherwise, there wouldn't be a tradeoff, wouldn't it?
The bottomline of the Williamsonian tradeoff is that merger which reduces competition should be allowed as long as the loss in the consumer welfare post merger is offse by efficiency savings in production costs.
3) More ridiculous and laughable is that the author actually used the MTR-KCR merger as sort of a JUSTIFICATOIN for the anti-competitive nature of the lawyers club!
I am particularly disturbed by the writer's lack of understanding of basic industrial organization theory. For example, the author argued that the MTR and KCR merger is OK although it would reduce competition after the merger as long as lower prices are expected post merger.
1) first of all, let's get the facts right. MTR (HK's underground railway) and KCR are pretty much STATE-OWNED ENTERPRISE though the former has a bit of shares listed on the HK stock exchange. Check this out. The government own's over 75% of the listed MTR and the KCR is a plain vanilla SOE, period.
So the reason why you get lower prices after merger (which reduces competition) is that it is a political decision, not an economic one.
2) Failing to see this, the author, or whoever is writing the submission for the Law Society, misapplied the efficency argument as espoused by UC Berkeley economist and one of the pioneer of the New Institution Economics Oliver Williamson which claims that sometimes merger which reduces competition might be a good thing because of improved production efficiency (an increase in producer surplus if you really insist on technical jargon). But the Willamsonian tradeoff as it is known in the literature does entail a RISE IN PRICES, NOT LOWERED ONES post merger. Otherwise, there wouldn't be a tradeoff, wouldn't it?
The bottomline of the Williamsonian tradeoff is that merger which reduces competition should be allowed as long as the loss in the consumer welfare post merger is offse by efficiency savings in production costs.
3) More ridiculous and laughable is that the author actually used the MTR-KCR merger as sort of a JUSTIFICATOIN for the anti-competitive nature of the lawyers club!
Wednesday, April 25, 2007
Dennis Carlton on Resale Price Maintenance
U of Chicago economist Dennis Carlton, who is now Deputy Assistant Attorney General for Economic Analysis, Antitrust Division of the US DOJ weigned in on the matter of whether RPM should be subject to a rule of reason or per se standard:
"The number of situations in which resale price maintenance can be used as a device to harm all consumers is rather limited—certainly it is understood that RPM can be used to facilitate a dealer or manufacturer cartel. But those situations do not describe the actual uses of RPM very well.
By and large, the evidence shows that resale price maintenance is typically used in ways that one would not characterize as anticompetitive. Therefore, RPM should be judged under a rule of reason standard.
The simple obersvation I make in my textbook is that we don't typically tell a manufacturer how to produce his product, so why should we tell him how to distribute it."
I agree. That's from an interview with professor Carlton, read it here. Professor Carlton's textbook, of course, is a classic and standard reference for all economists working in the field of industrial organization. You can get it here.
"The number of situations in which resale price maintenance can be used as a device to harm all consumers is rather limited—certainly it is understood that RPM can be used to facilitate a dealer or manufacturer cartel. But those situations do not describe the actual uses of RPM very well.
By and large, the evidence shows that resale price maintenance is typically used in ways that one would not characterize as anticompetitive. Therefore, RPM should be judged under a rule of reason standard.
The simple obersvation I make in my textbook is that we don't typically tell a manufacturer how to produce his product, so why should we tell him how to distribute it."
I agree. That's from an interview with professor Carlton, read it here. Professor Carlton's textbook, of course, is a classic and standard reference for all economists working in the field of industrial organization. You can get it here.
Monday, April 23, 2007
Protection of Consumer Interests, why?
There is a discussion going on up at Hong Kong Competition Law about how HK consumers are not being protected by their government compared with governments elsewhere where consumers protection laws are in place.
Why consumers need protection? Is it not the case that standard economics tells us that a market with sufficient competition will ensure that consumers get what they want at the lowest possible prices?
OK, you respond, sometimes markets might fail because of monopoly and other anti-competitive practices. Hence, leave them alone, markets might be unable to provide consumers with what they want at the lowest possible prices.
Let's assume for a moment that indeed that were the case. So you introduce a competition law, a law supposedly would ensure that markets stay competitive. And let's check how we are doing here. With the markets functioning properly with the help of a competition law, aren't consumers' interests get well taken of already. If so, why we would need another law which supposedly would perform the same function as competition law? That is why need to have another consumer protection law on top of a competition law?
The only argument I can think of for a consumer protection law separate from a competition law is to assume that consumers DO NOT KNOW WHAT WANT. Putting it in another way: While competition can offer them what they want at the best prices and quality, those wants might not be serving their best interests.
I just don't think that is the case. Do you believe that some government lawyers would know better than you do where your real interests lie?
Why consumers need protection? Is it not the case that standard economics tells us that a market with sufficient competition will ensure that consumers get what they want at the lowest possible prices?
OK, you respond, sometimes markets might fail because of monopoly and other anti-competitive practices. Hence, leave them alone, markets might be unable to provide consumers with what they want at the lowest possible prices.
Let's assume for a moment that indeed that were the case. So you introduce a competition law, a law supposedly would ensure that markets stay competitive. And let's check how we are doing here. With the markets functioning properly with the help of a competition law, aren't consumers' interests get well taken of already. If so, why we would need another law which supposedly would perform the same function as competition law? That is why need to have another consumer protection law on top of a competition law?
The only argument I can think of for a consumer protection law separate from a competition law is to assume that consumers DO NOT KNOW WHAT WANT. Putting it in another way: While competition can offer them what they want at the best prices and quality, those wants might not be serving their best interests.
I just don't think that is the case. Do you believe that some government lawyers would know better than you do where your real interests lie?
Monday, March 26, 2007
Per Se Illegality or Rule of Reason?
WSJ has a very interesting story by Ronald Cass, Dean emeritus of Boston Law School, on a pending case which challenges the per se illegality of resale price maintanence.
Wednesday, March 21, 2007
Dick Epstein on Antitrust
From University of Chicago law professor Dick Epstein:
Antitrust Consent Decrees in Theory and Practice
"Epstein observes how differences in antitrust philosophy can shape the kinds of comprehensive settlements that the government will seek and the courts will grant. Epstein takes issue with aggressive antitrust enforcement strategies that seek to use government power to fundamentally alter industry structures or the business practices of regulated firms, in some instances leading to their breakup. To explain the perils of that approach, Epstein carefully examines the history of consent decree litigation, culminating in detailed studies of the AT&T breakup and the government antitrust actions against Microsoft.
Applying modern theories of antitrust analysis, Epstein's central thesis is that bold antitrust remedies that are not tightly tied to a defensible theory of wrongful conduct often prove counterproductive. Such measures typically force firms to adopt business practices and structural reorganizations that substantially impede their ability to compete effectively in the marketplace. The disparate fates of AT&T and Microsoft are the result of a major and fruitful shift in thinking about the use and limits on the antitrust laws in a wide variety of industrial contexts."
You can get it here.
Antitrust Consent Decrees in Theory and Practice
"Epstein observes how differences in antitrust philosophy can shape the kinds of comprehensive settlements that the government will seek and the courts will grant. Epstein takes issue with aggressive antitrust enforcement strategies that seek to use government power to fundamentally alter industry structures or the business practices of regulated firms, in some instances leading to their breakup. To explain the perils of that approach, Epstein carefully examines the history of consent decree litigation, culminating in detailed studies of the AT&T breakup and the government antitrust actions against Microsoft.
Applying modern theories of antitrust analysis, Epstein's central thesis is that bold antitrust remedies that are not tightly tied to a defensible theory of wrongful conduct often prove counterproductive. Such measures typically force firms to adopt business practices and structural reorganizations that substantially impede their ability to compete effectively in the marketplace. The disparate fates of AT&T and Microsoft are the result of a major and fruitful shift in thinking about the use and limits on the antitrust laws in a wide variety of industrial contexts."
You can get it here.
Monday, March 19, 2007
First We have Lawyers, Then Marketing Professors, now It's the Actress' Turn
As things are developing, it seems inevitable that HK would have a competition "law" very soon. Read more here.
Several types of professionals have already voiced their support for such a "law", first we have lawyers (Ronny Tong of the Civic Party for example) and then we have marketing professors (see here), now we have an actress who says independent firm companies would be wiped out without such "law".
SCMP reported today:
"Josephine Siao Fong-fong, the former child star who went on to become one of Hong Kong's most prominent actors, said the ownership of cinemas by the local film industry made life difficult for small-scale filmmakers..."
"In Hong Kong, the market is controlled by big companies who distribute their own films to their own cinemas," she said. "Prime-time bookings - summer holidays, Christmas and the [Lunar] New Year [periods] - are all held for their own films. Independent filmmakers are crowded out and [are] unlikely to survive."
"Time and money are saved [but] quality is lost. Without anti-trust laws a local film industry is unlikely to flourish in Hong Kong," she said."
Read more here.
Questions:
How did the current big companies become big in the first place? Were they all "small" to start with? If so, then these current big players might very well encounter the same problems that Josephine said the existing small firms have to face. Did all these former small potatoes (now major studios) grow big thanks to the antitrust law?
What is wrong with trading off a bit of quality (assuming Josephine were right that indeed quality is being sacrificed for the sake of saving money and time) in order to save money and time? Obviously, she does not understand that economics does not address problems of the all-or-nothing kind, but choice at the margin.
If indeed independent producers could produce such "quality" products, who is to prevent them from getting the financial support needed for them to build their own cinemas? I am sure a lot of investors would be interested in grapping the market from the existing major players if such opportunities were indeed presence.
Several types of professionals have already voiced their support for such a "law", first we have lawyers (Ronny Tong of the Civic Party for example) and then we have marketing professors (see here), now we have an actress who says independent firm companies would be wiped out without such "law".
SCMP reported today:
"Josephine Siao Fong-fong, the former child star who went on to become one of Hong Kong's most prominent actors, said the ownership of cinemas by the local film industry made life difficult for small-scale filmmakers..."
"In Hong Kong, the market is controlled by big companies who distribute their own films to their own cinemas," she said. "Prime-time bookings - summer holidays, Christmas and the [Lunar] New Year [periods] - are all held for their own films. Independent filmmakers are crowded out and [are] unlikely to survive."
"Time and money are saved [but] quality is lost. Without anti-trust laws a local film industry is unlikely to flourish in Hong Kong," she said."
Read more here.
Questions:
How did the current big companies become big in the first place? Were they all "small" to start with? If so, then these current big players might very well encounter the same problems that Josephine said the existing small firms have to face. Did all these former small potatoes (now major studios) grow big thanks to the antitrust law?
What is wrong with trading off a bit of quality (assuming Josephine were right that indeed quality is being sacrificed for the sake of saving money and time) in order to save money and time? Obviously, she does not understand that economics does not address problems of the all-or-nothing kind, but choice at the margin.
If indeed independent producers could produce such "quality" products, who is to prevent them from getting the financial support needed for them to build their own cinemas? I am sure a lot of investors would be interested in grapping the market from the existing major players if such opportunities were indeed presence.
Competition "Law" is Not Really a Law
Today's edition of SCMP reported that:
"A cross-sector competition law is to be introduced to regulate seven anti-competitive practices, while exemptions will be given to parties with less than a 20 per cent market share, sources from the government and Democratic Party say.
Seven anti-competitive practices - price-fixing, bid-rigging, market allocation, sales and production quotas, joint boycotts, unfair or discriminatory standards, and abuse of dominant position - will be covered by the law."
Read more here.
Why I have put quotation marks on the word "law" above? Hayek has defined law in many occasions that it is a set of rules of conduct equally applicable to all. Apparently, such will not be the case for our, eh, competition "law"!
"A cross-sector competition law is to be introduced to regulate seven anti-competitive practices, while exemptions will be given to parties with less than a 20 per cent market share, sources from the government and Democratic Party say.
Seven anti-competitive practices - price-fixing, bid-rigging, market allocation, sales and production quotas, joint boycotts, unfair or discriminatory standards, and abuse of dominant position - will be covered by the law."
Read more here.
Why I have put quotation marks on the word "law" above? Hayek has defined law in many occasions that it is a set of rules of conduct equally applicable to all. Apparently, such will not be the case for our, eh, competition "law"!
Thursday, March 15, 2007
Where Are the Economists?
First we have the lawyers who hijack the whole debate on whether HK should have a competition law, now marketing experts join in.
According to a story in SCMP:
"A Chinese University academic has called for the introduction of a cross-sector competition law after a survey found Hong Kong retailers, especially supermarkets, abused their market power with suppliers.
The survey of 121 suppliers by the university's marketing department found many retailers dictated prices and demanded exclusivity...
Supermarkets were found responsible for an overwhelming majority of the unfair practices by retailers. About 70 per cent of the disadvantaged suppliers were found to have a supermarket as their major retailer...
Professor Sin said a cross-sector competition law was needed to ensure fair play between suppliers and retailers."
Read more here.
Not so fast professor Sin. For your argument to go through, you have to assume that the supermarkets/retailer do not pass on the savings that they get from squeezing the suppliers. If they do, consumers win at the end. And what's the problem with that?
To argue that the retailers are the ones who would buy low (from suppliers) and sell high (to consumers), you have got to show that the retailing industry is not competitive. That of course is a completely different issue which your research simply does not address! Why the rush to conclude that HK needs a competition law then?
Going back to your original thesis, suppliers being squeezed by retailers, if indeed the suppliers feel that they are being squeezed by retaliers, why don't they simply refuse to supply them and set up their own retail outlets through vertical integration? Why complain?
And for those who question the rationale of slotting fees, I strongly recommend them to read the paper by UCLA economist Ben Klein and George Mason University law professor Joshua Wright which you could access here.
BTW, where are HK's economits? Why they are silent on the topic which they should have a lot to say?
According to a story in SCMP:
"A Chinese University academic has called for the introduction of a cross-sector competition law after a survey found Hong Kong retailers, especially supermarkets, abused their market power with suppliers.
The survey of 121 suppliers by the university's marketing department found many retailers dictated prices and demanded exclusivity...
Supermarkets were found responsible for an overwhelming majority of the unfair practices by retailers. About 70 per cent of the disadvantaged suppliers were found to have a supermarket as their major retailer...
Professor Sin said a cross-sector competition law was needed to ensure fair play between suppliers and retailers."
Read more here.
Not so fast professor Sin. For your argument to go through, you have to assume that the supermarkets/retailer do not pass on the savings that they get from squeezing the suppliers. If they do, consumers win at the end. And what's the problem with that?
To argue that the retailers are the ones who would buy low (from suppliers) and sell high (to consumers), you have got to show that the retailing industry is not competitive. That of course is a completely different issue which your research simply does not address! Why the rush to conclude that HK needs a competition law then?
Going back to your original thesis, suppliers being squeezed by retailers, if indeed the suppliers feel that they are being squeezed by retaliers, why don't they simply refuse to supply them and set up their own retail outlets through vertical integration? Why complain?
And for those who question the rationale of slotting fees, I strongly recommend them to read the paper by UCLA economist Ben Klein and George Mason University law professor Joshua Wright which you could access here.
BTW, where are HK's economits? Why they are silent on the topic which they should have a lot to say?
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