Competition Policy's Limits
Abstract: This article discusses the limitations of competition policy. The obvious limitations are that government bodies such as the ACCC do not scrutinize the Government itself, which is one huge monopoly. Also, competition has limits as a concept.
A. Competition in Sport.
Back in September 1991, the article Sport, Australia Rules! spoke out against the practices of the NSW Rugby League and gave examples of anti-competitive forces that control sport. Ironically, for many people sport seems to epitomize competition. But taking a look at how hard it is for rugby players to earn a spot on the field and how fiercely teams battle among each other, is only one way of measuring competition. One should also measure competition at the organizational level. If there is no competition at organizational levels, any competition on the field is effectively rigged. Despite the apparent fierce competition on the rugby fields, the whole system now turns out to be rigged from the top down, at least that is what the recent court decision seems to suggest. Unfortunately, Australia's litigation system makes it almost impossible to expose such practices without the risk of being sued for damages and defamation. The (Australian) law has a way of silencing any critics.
The recent court case between the ARL and Super League has many ramifications for sport. Not only will sportclubs now have to avoid practices that are intended to prevent rival organizations to be set up; they also have to redefine their relation with the various levels of government; any involvement of the Government with sport, be it at local council level or at national level, tends to favor one club over another. Some therefore argue that, to create a "really competitive" environment, the Government should stop all sport subsidies, grants and other privileges to sport clubs and instead give personalized vouchers that people can spend with the sportclub of their choice.
This discussion about sport vouchers is similar to the educational vouchers debate; the Government will still decide how such vouchers can be spent; also, it leaves in place a dictatorial system to collect the money for vouchers in the first place. In the end, both education and sport turn out to be largely created by the Government. Take the Government out of sport and what is left may try to be successful as a form of art or a form of entertainment, but it will fundamentally change in nature, it may even completely disappear; similarly, education depends on recognition of qualifications and on funding and other privileges by the Government; take away the Government and the whole concept of education changes in nature, if not disappears altogether.
B. Shaping the "Market".
How much true competition is there within a system that is rigged because there are anti-competitive forces in control at the top? This question is asked again in the article (see The Evil Side of Sport). But the question does not merely apply to sport, it also applies to sectors such as health care, education, broadcasting and tourism, to name a few. More generally, this question can be asked for the way the entire society is organized in a political sense, for the way society is organized anywhere in the world by the cartel of governments of the world. Police, courts, government authorities and other bodies control many aspects of the economy and society at large. Their operations are to a large extent out to prevent any competition to their control, to give them exclusive control and to maintain this control. This is how the whole system is rigged.
C. Competition Policy fails to scrutinize the Government.
In Australia, as in other nations, the Government is forced to embrace competition more and more, initially in international trade, but gradually in more sectors of society. In Australia, there is a government body, the Australian Competition and Consumer Commission (ACCC), with responsibilities for competition issues. The ACCC scrutinizes specific markets for a lack of competition.
Much legal rhetoric in competition cases is spent on 'clarifying' exactly what is constituted by a 'market'. The question of how broad the market is was crucial in the Rugby League case. In this case, two views were prominent: A. a focus on rugby league specifically as a market; vs. B. a broader focus on a group of sports including soccer, basketball and cricket. In one court ruling, the decision to take a broad approach led to the conclusion that there was sufficient competition in this 'market'. This decision was overruled by another court that took a more narrow approach.
Furthermore, the question of WHICH markets the ACCC should scrutinize is important; the recent court ruling includes professional sport as a market that should abide by the Trade Practices Act (TPA). This confirms trends to widen the coverage of the TPA. Over the past few years, the Government has extended the ACCC's reach to areas such as banking, pay-TV, non-incorporated persons (i.e. professionals such as doctors, legal partners, etc), government authorities dealing with the export of food, utilities such as railways and suppliers of electricity, water, etc.
But any focus on specific markets overlooks the overall control that is established and maintained by the huge monopoly constituted by the Government in all its capacities. The ACCC may scrutinize mergers and price-fixing arrangements among businesses, but looks away when absolute control is exercised by the combined power of law, police, courts, military and other authorities. Itself a part of the Government, the ACCC does not scrutinize the Government, as an institution that rules society, for any anti-competitive tendencies. The very impact of the ACCC depends on law enforcement. In this sense, the system is rigged from the top down.
The question is: When the whole system is rigged from the top down, does it make much difference how fiercely the players battle it out on a supposedly level playing field? Doesn't it make sense to focus on what is happening at the 'top', at the way Parliament claims absolute power and takes many actions to endorse and enforce this position of power to the detriment of economic efficiency and the moral and social welfare of people? Doesn't the whole system hang together by the concept of monopoly?
D. The "Action Man"-Approach.
One answer to this question is provided by what has been referred to in earlier articles in "Optionality" as the "Action Man"-approach, that suggests that one does not really create more competition, as long as there is monopoly control at the top by a system that is trying to keep its position of power. The "Action Man"-approach suggests to break up this monopoly of power at the top.
E. DonParagon's Vision.
DonParagon warns that any grand schemes to break up the Government could backfire. Efforts to establish competition at government level are invariably centralized, top-down and legalistic initiatives, and focusing on the Government's power may endorse its very position. In Don's Vision of the Future, the Government will be forced to embrace competition more and more, due to inevitable long term trends and irreversible changes that will eventually make the Government become irrelevant.
F. Competition as a Concept has some inherent Limitations.
Any competition policy, Don argues, is conceptually and inherently too limited to completely reject the Government. Competition implies that there are rules that people and business have to abide by, as a minimum to ensure that there is competition. Sport is often referred to as an example of fierce competition, despite the fact that sport is full of rules and discipline and is a prime example of central control. A 'competitive' society is controlled by laws that make it competitive.
Don argues that the concept competition has problems going beyond commercial activities, e.g. into more social areas. Competition is now being enforced in professional sport (see court case, but not in the Olympic Games that clearly exploit a privileged position endorsed by the Government. How can competition apply to education, health care, welfare, law and order, etc? Views differ strongly regarding such questions, which shows that competition means different things to different people.
In Don's Vision, competition will more and more break up monopolies, but remains a characteristic of the Era of Government. Instead of focusing on competition, Don looks beyond competition to see optionality.