Consumer regulators sabotaging consumers’ interests

We are familiar with the ACCC taking action to constrain the ability of supermarkets to offer discounted fuel to consumers and to inhibit competition in retail marketing by door-knocking.   

The opposition to allowing supermarkets to discount fuel to the degree they would prefer was based on the perceived need to protect petrol retailers which are independent of the supermarket chains – presumably the ACCC thinks that once these have been knocked out the supermarkets like stereotyped dumpers of goods, will jack up the prices to retrieve their losses.  Such outcomes have never been documented and are inconceivable in the rugged competitive Australian retailing environment.

Former head of electricity regulation in the UK, Stephen Littlechild reports that they too have the disease whereby institutional regulators prevent consumers gaining price advantages.  Littlechild notes (correction) that OFGEM is powerless to prevent Tesco from offering 20p a litre discounts on petrol but prohibits themoffering comparable discounts on electricity or gas.  He blames this cockeyed judgement that the consumer is harmed by lower prices on the fact that OFGEM no longer has an economist at its hierarchical apex.

Maybe, but the quality of economists is not what it used to be – most are trained in how to distort economies and have no concept of consumer sovereignty or the catallaxy of markets.  And in any event, the Chairman of the ACCC claims to be an economist and has around him coteries of people in the energy advising roles with similar such claims.

 

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19 Responses to Consumer regulators sabotaging consumers’ interests

  1. ar

    The govt should commission a second body similar to ACCC and retailers could choose which ruling they preferred to follow… It couldn’t hurt?

  2. Baldrick

    The government should scrap the ACCC and let the market sort out itself. Consumers determine the viability of markets nowadays, not companies.

  3. Baldrick

    BTW – your first 2 links are deceased.

  4. Combine_Dave

    Any chance the libs can abolish these tax munchers.

    Or at the very least replace their incompetent management with Sinc.

  5. thefrollickingmole

    Try this one. The rental outlet I had let customers keep the goods at the end of the contract, no charge, “gifted to the household” was the term used.
    That meant pretty well every bit of equipment was new when they got it.
    That meant although paying well over retail for the items, they got to keep them in the end.

    The government changed the legislation (I am now out of it, the job turned into compliance for the government first, customers second) so that that became illegal.
    I never saw a justification for it that passed any sort of test.

    One of the remaining franchisees no has 2 sales staff and 4 office workers, compliance is killing.

    Even better compliance was used as a tool to “steal” my business back by the franchisor, by loading more and more compliance they can be sure to find a “breach” to screw you over.

  6. Dorothy

    Alan Jones on 2gb prattles about the evils of supermarket discounted petrol. He is on a mission to stop this as well as Coal seam gas !!!

  7. Nads

    There seems to be a presumption that independent retailers can’t enter (or re-enter) the market if commercial opportunities exist. The ACCC could actually err on the side of letting market forces operate in an unfettered manner and intervene if, and only if, some major demonstrable distortion arises down the track. Surely this would be a better balance of regulatory risk.

  8. bring back Allan Fels – did I just say that?!

  9. Armadillo

    Got my Origin electricity bill yesterday. Here’s a nifty little marketing trick;

    Enclosed was a slip entitled “It’s easy to take back control”.

    Step 1 – Advertisement for the Do Not Call Register and how to join.
    Step 2 – A sticker to put on your door – “Please do not knock – No salespeople, thank you”.

    Obviously, I’m an Origin customer. Accordingly, what better way to minimise the chances of me talking to those pesky competitors offering lower prices? I thought it quite clever.

    I am already on the DNC, but I will put up the sticker. I already shop around for energy providers once a year anyway, but I guess millions wouldn’t.

  10. wazsah

    It is not rocket science to figure that ColesWoolies have an infinity of ways to recover the fuel discounts and a bit more. So I think it is probably an easy case for ACCC to make that they dislike shopper-dockets.
    For me the single best thing for consumers in years has been ALDI – much cheaper prices overall if you are happy with their products.
    Just to annoy some people I will stick up for FuelWatch WA – used it for years – puts some power back in your hands – you can quickly find best prices here n there over Perth – plan your best tankful purchase – you know prices can not change until midnight. No wonder the OilCos fought that going national.

  11. Old School Conservative

    In my neophyte approach to Economics, I see supermarkets dominating the petrol retail outlets in time as a result of cross-subsidisation from grocery lines. Assuming the small retail stations go under due to decreased revenues, won’t the giant supermarkets have a de-facto cartel in place, with consequent price rises an unavoidable outcome? I am assuming a petrol company chain of outlets won’t compete aggressively with their best customers, the supermarket petrol outlets.
    I also thought the USA’s anti-trust raft of legislation was working in the consumers’ favour by minimising the competitive strength of large organisations.

  12. Frank Easterbrook argued that lower prices should be per se lawful under competition law. That would be a major reform!

  13. Tel

    Obviously, I’m an Origin customer. Accordingly, what better way to minimise the chances of me talking to those pesky competitors offering lower prices? I thought it quite clever.

    Dodo was offering 15% discount for every bill you pay on time. We started the process of moving away from Origin and then Origin very quickly came back with a 17% discount for bills paid on time. There is just starting to be a little bit of competition amongst the retailers out there (in NSW at least). I think the door knockers don’t help much, you can search online much more easily.

  14. will

    In my neophyte approach to Economics, I see supermarkets dominating the petrol retail outlets in time as a result of cross-subsidisation from grocery lines. Assuming the small retail stations go under due to decreased revenues, won’t the giant supermarkets have a de-facto cartel in place, with consequent price rises an unavoidable outcome? I am assuming a petrol company chain of outlets won’t compete aggressively with their best customers, the supermarket petrol outlets.
    I also thought the USA’s anti-trust raft of legislation was working in the consumers’ favour by minimising the competitive strength of large organisations.

    Where to start?

    The oil industry is highly competitive. Anyone can import a boat load and sell thorough a small service station. BP competes effectively against the woolies and coles service stations, even without the discount dockets. I am not sure what a ‘cartel’ actually is, and as I recall legislation refers to ‘cartel behaviour’ as if it is easy to prove. Windows dominates the PC market as they offer a good product and a good price. Anyone can develop a competitor product, but don’t. Some brilliant legal minds thinks that supplying a product consumers want to the exclusion of any other is cartel type behaviour.

    Coles and Woolies dominate the supermarket industry as they both offer cheap prices. Same with petrol. Anytime they try to increase prices, consumers go elsewhere, and competitors enter the market. They can control the amount they sell, or they can set the price, but they cannot do both. They are dictated to by the market. The petrol discounts have been going for a number of years, If anything bad was going to happen, it would have happened already. The ACCC is just denying consumers cheap petrol. The smaller independent service stations were cactus years ago. Remember ACTU Solo?

    The oil industry is much like supermarkets, and relies on a slim margin and high volume to attain profitability, to the benefit of consumers.

  15. Chris

    The cap on petrol discount vouchers has worked out really well for me because the supermarkets haven’t given up on vouchers. Instead they’ve started offering vouchers on discounts on future supermarket purchases. Eg Coles has been regularly offering $20 vouchers for spending $160 – much better value than I ever got out of petrol vouchers.

    Armadillo – AGL have been doing something similar for a while as well – since there was that court case that established that companies can be fined if they or their contractors ignore “no door to door salespeople signs” . In my experience those electricity door to door salespeople are pretty bad and since I work from home I’ve seen a few. They’ve all been quite aggressive and open with lies – eg “I’m here because there’s a problem with your electricity bill”. Anything in an attempt to get in the door.

  16. Chris

    Windows dominates the PC market as they offer a good product and a good price. Anyone can develop a competitor product, but don’t.

    If it was just a matter of offering a good product and a good price I wouldn’t have a problem with their behaviour. But Microsoft in the past have used their monopolistic power to keep their monopoly by telling people who sell computers that if they offer to sell a computer without windows on it then Microsoft will charge them a lot more for any windows licences they do sell. And that made it much harder for new operating systems to get started. There’s been a bunch of other things which they’ve done to make it harder for competitors to enter the market rather than improve their own product or sell it at a better price.

  17. wazsah

    will said – [Anyone can import a boat load and sell thorough a small service station.]
    And where do you store your boatload will? Know of any empty tank farms for rent?
    I think there is a very high entry level to get into that game.
    Would enjoy the OilCo squeals if a strong new player was able to do exactly what you imply is easy.
    You also say – [Coles and Woolies dominate the supermarket industry as they both offer cheap prices.]
    I think it is more that both have grown very large over a long time.
    Imagine what their prices would be without an ALDI nearby.
    They cam also be ruthless competitors. A few months ago a little Mr Sushi bar opened in an arcade in front of our local Woolies – northern ACT. In about a week Woolies had a copycat Sushi bar instore.

  18. Alan, remember Ronald Coase’s famous observation in 1971:

    “One important result of this preoccupation with the monopoly problem is that if an economist finds something–a business practice of one sort or other–that he does not understand, he looks for a monopoly explanation.

    And as in this field we are very ignorant, the number of ununderstandable practices tends to be very large, and the reliance on a monopoly explanation, frequent.”

    Recall a second Coasean maxim: Virtually anything you do gets you into trouble. Raise prices and you are part of a cartel. Lower prices and you are guilty of predation. Keep them constant and you are engaging in monopoly maintenance.

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