Some Competition Policy Issues

Two attachments may be of interest - especially noting the emerging debate in Australia about industry policy to actively boost the competitiveness of particular sectors (rather than relying on competition to do so) - see my recent draft paper on The Industry Policy Debate: A Brief Introduction.

'Australia joins US in trust-busting' (Ryan C., Australian, 21/4/97)

This article reflects the extension into the international arena of 'competition policy', which is now being seen as having more potential in liberalising trade than traditional trade negotiations (because trade negotiations can only affect border controls - while competition policy is hoped to address the non-tariff barriers within economies themselves which impede market access). This approach is being promoted particularly by USA.

The main US objective is that competition policy be applied in East Asian economies (especially Japan following a joint study of obstacles to market access, the Structural Impediments Initiative). This goal may fail - because of its inconsistency with the way those economies work internally (eg commercial transactions are not primarily based on pricing considerations in a competitive situation, but are secondary to social relationships; and governments have the role of boosting the market power of national companies rather than restraining it in the interests of consumers which is the goal of 'trust busting'). Those internal economic arrangements are deeply culturally embedded - and have proven competitively successful in recent decades.

This issue is important also to Australia's efforts (notably unsuccessful to date) to achieve substantial export gains into rapidly developing and growing Asian markets.

Hypercompetition (D'Aveni R. 1994)

This book argues that firms now can not permanently protect any competitive position because of changes in the global business environment leading to 'hypercompetition'. In simple terms many markets are said to now require that firms continually create competitive advantages - rather than defending their existing advantages. Successful firms in a 'hypercompetitive' market would be those who themselves are the first to demolish their existing competitive positions.

Thus, the book's author suggests in an Appendix, that anti-trust policy (the traditional core of competition policy reflected in the role of the previous Trade Practices Commission in Australia) is no longer relevant, and is an obstacle to successful competition by major US companies. 'Anti-trust' policy had been developed to protect consumers against the market power of firms whose unchallengeable positions allowed monopoly pricing.

This book is also of possible interest in outlining some current approaches to corporate strategy which both Queensland's firms and government might need to consider.

18 March, 2003