Comments (10)

• Björn Lundahl

  The EU hinders companies to compete!
  

  When companies compete in separate markets, different competitive measures are often taken by companies in those markets. People in those markets, because of culture, values goods and services differently and are willing to pay for goods and services in accordance with those values. For instance, in Italy, people are very willing to buy cheap cars made by the Italian car manufacturer “Fiat”. Volkswagen, decided to sell their cars in Italy to Italians for lower prices. Volkswagen, thought, that these measures were needed in that market to compete effectively. People from Austria and Germany went to Italy in search for bargains “offered by Volkswagen”. Volkswagen dealers said no. Low prices are only offered to Italian customers! For these “crimes” The European Union's High Court upheld a $110.5 million fine for Volkswagen. This happened in 1998. Now, Volkswagen and other companies must have same prices in all markets to all people, otherwise they risk to get heavily punished. In other words, if people are willing to cross borders in search for bargains, it is better for a company like Volkswagen, to raise its prices* in Italy and lose market share. Apart from Volkswagen, the Italians will suffer. Alternatively, they could have the same low prices in all markets, but that might not be profitable or even lead to bankruptcy. In the very end, competition is hindered! This is only an example of Government in action and what it actually does “to promote competition”.

  For more information about this case, go to;

  http://www.globalethics.org/newsline/members/issue.tmpl?articleid=09220316204320

  And to;

  http://news.bbc.co.uk/1/hi/business/821620.stm

  For some further information, go to;

  http://www.businessweek.com/magazine/content/02_19/b3782014.htm

  The flexibility of the market is needed.
  Different situations in diverse markets need different actions, but Government agencies are guided by rigid rules. Governments do not know how to run an economy, they lack the essential tools; the free market. The more Governments intervene in the economy, the more chaotic will the economy be. Governments decision making is relied upon whims by the electorate, markets, on the other hand, are relied upon prices of supply and demand; recourses are allocated to those ends which are valued most highly by consumers. When mentioned destructive actions bloom, like in the former Soviet Union, the “destructiveness is revealed”. In the case I have mentioned, consumers have not gained anything if Volkswagen raised their prices in Italy because of this verdict. Rigid rules can lead to situations like that. Governments do not know the different circumstances that exist in diverse markets, to apply the same rigid rules in all markets do not gain anybody.

  For example, in Sweden car manufacturers guarantee car bodies against corrosion for 6-12 years. Swedish consumers demand this, probably because of our climate. I do not actually know, but I do not think that the same manufacturers offer the same guarantees all over the world.

  Naturally, weak companies that do not serve the consumers well will try out every possible way to use those laws to protect them against competition. As the antitrust authorities do not, as mentioned, know all different circumstances, their verdicts will probably be wrong.

  If we really want increased competition, why not adopt free trade between nations. Why does the EU and the USA not follow that path? The reason is that they do not want increased competition.

  For an example, I quote from answers.com;

  “In the United States, the decade from the mid-1980s to the mid-1990s saw import quotas placed on textiles, agricultural products, automobiles, sugar, beef, bananas, and even underwear—among other things. In a single session of Congress in 1985, more than three hundred protectionist bills were introduced as U.S. industries began voicing concern over foreign competition”.

  Go to;

  http://www.answers.com/import+quotas?gwp=11&ver=2.0.1.458&method=3

  *From the book “Antitrust The Case for Repeal”, by Dominick.T. Armentano, page 18:

  “Governments antitrust suits against firms that price discriminate almost always result in the defendant firm raising some of its prices to comply with the law.”

  
  Björn Lundahl
  Göteborg Sweden

  Published: January 10, 2007 11:40 AM

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  New Video Appears to Show Body of Saddam After Hanging

  Published: January 10, 2007 12:03 PM

• J D

  For another slant on government intervention and the price of bananas google "United Brands" and U.S. Marines.

  Published: January 10, 2007 2:01 PM

• Yumi

  The EU competition law is so flawed and it's great that Mr. Neri wrote on this. The law regarding the abuse of dominant position, for instance, is so vague and arbitrary. Firstly, a relevant 'market' has to be defined in regards to a particular product in question and this discussion can go on and on. Then, once it is defined, if the producer has roughly over 40% of the market share, the producer has prima facie a dominant position. Although having a dominant position is not illegal, the court would almost always rule that a company is abusing the position.

  Published: January 10, 2007 3:25 PM

• Yumi

  The EU competition law is so flawed and it's great that Mr. Neri wrote on this. The law regarding the abuse of dominant position, for instance, is so vague and arbitrary. Firstly, a relevant 'market' has to be defined in regards to a particular product in question and this discussion can go on and on. Then, once it is defined, if the producer has roughly over 40% of the market share, the producer has prima facie a dominant position. Although having a dominant position is not illegal, the court would almost always rule that a company is abusing the position.

  Published: January 10, 2007 3:26 PM

• Artisan

  Anti-trust always sounds great at first. There's a new EU proposal on energy. Distribution networks will probably be state controlled soon, because there's not enough "competition" in that segment.

  Of course, once they're public, market openness is only allowed in a limited area, while some parts of the organisation are made State monopolies ! The fact is most citizen don't think State is a monopoly. Monopoly is getting to be a word that only applies to private businesses!

  One argument however: they ruled energy contracts to be shorter in the EU lately, allowing public comunity consumers to switch sooner to a cheaper provider for instance. Fact is the market only offered 10 years contracts before that. This ruling is often mentioned as an example of beneficial anti-trust policy...
  

  Published: January 11, 2007 7:49 AM

• Paul Marks

  The Euro elite often attack the United States, but they slavishly imitate all the worst things about the country (whilst avoiding the good things about it).

  For example, there is a lot of "identity politics" with people demanding subsidies and special regulations (such as "antidiscrimination" statutes) for women, the disabled, people with a different colour skin, people who are "gay" (and so and so on). I used to think that this was a British thing (or at least a northern European thing), but now (for example) the Mayors of Paris and Rome make a big thing of their "gayness" (as if their practice of homosexual intercourse somehow made them better at governing).

  Of course the Muslims (or rather those who claim to speak for them - and with every identity group it is the "activists" and self appointed "community leaders" who are important),who are becomming the next big thing in Euro identity politics, take a rather dim view of such things as "femimism" and "gay rights", but the social democratic Euro elite manage to be pro "feminst", pro "gay" and pro the "Muslim community" all at the same time.

  The various P.C. antics that have been part of American politics since the 1960's are now all over Europe (at least all over the European Union).

  So it is perhaps only to be expected that the American absurdity of "antitrust" (based as it is on the false "perfect competition" economic model of neoclassical economics) would become a central E.U. policy as well. I doubt that explinations that a "market" is the web of civil (non violent) interactions of human beings, not some predetermined utopia of "fairness", will have much effect.

  "Antitrust" like bans on "insider trading" and "anti discrimination" regulations (indeed lots of taxpayer's money spent on "diversity") has become high fashion among the Euro elite, and nothing is more important to an elite than fashion.

  Indeed the Euro elite seem to be taking this fashion further than the American elite ever did (or, rather, was allowed to).

  Some people deny that the above is all "fashion" and point to the mutant forms of Marxism (such as that of Herbert Marcuse) that started in Europe itself (before heading off to the United States), which held that the traditional working class had failed in its historic task of destroying capitalism, and held that new groups (based on sex, colour or whatever) would have to be politized to achieve this objective.

  Indeed some would point to the old form of European idenity politics - the ethnic politics exploited by (among others) the German National Socialists. The Nazis (of course) were also very much opposed to the "unfairness" of allowing a real market (i.e. free civil interaction).

  However, I rather doubt that the politicians, administrators, academics and media folk who make up the Euro elite really have much knowledge of mutate forms of Marxism or of the ravings of National Socialism. To them "anti trust" like "anti discrimination" is all part of a warm fuzzy fashion for "fairness" (as in a "market" where everyone has the same knowledge as everyone else, and where every enterprise has the same cost structure as every other enterprise). They want to be "nice people" and that this might be in contradiction with their taking taxpayers money to spend on their pet projects, or passing regulations to order people into the predetermined patterns of what they consider "fair" - well the contradiction never occurs to them.
  

  Published: January 11, 2007 1:00 PM

• Björn Lundahl

  Alan Greenspan did not like antitrust laws and their authorities!

  
  Actually, I do not like Ayn Rand, but still, in her book ”Capitalism: The Unknown Ideal”, there is an interesting chapter (Antitrust, chapter 4) written by Alan Greenspan (former chairman of the Federal Reserve). I, hereby quote from page 70 a few sentences written by Alan Greenspan “The entire structure of antitrust statutes in this country is a jumble of economic irrationality and ignorance. It is the product: (a) of a gross misinterpretation of history, and (b) of rather naive, and certainly unrealistic economic theories.”

  I, hereby also quote some of the last sentences from this chapter (page 71) “Whatever damage the antitrust laws may have done to our economy, whatever distortions of the structure of the nation’s capital they may have created, these are less disastrous than the fact that the effective purpose, the hidden intent, and the actual practice of the antitrust laws in the United States have led to the condemnation of the productive and efficient members of our society “because” they are productive and efficient”. Naturally, these statements also can be applied to EU regulators and antitrust laws. Read the whole story! Go to;

  http://www.polyconomics.com/searchbase/06-12-98.html

  
  Björn Lundahl
  Göteborg Sweden
  

  Published: January 13, 2007 1:07 PM

• Björn Lundahl

  Massimiliano Neri

  Thank you for a very good article. I will save this one.

  Björn Lundahl
  

  Published: January 14, 2007 6:14 AM

• Björn Lundahl

  The EU favors high prices of bananas.

  Answers.com:

  “The countries of the European Union have traditionally imported many of their bananas from the former European island colonies of the Caribbean, paying guaranteed prices above global market rates. As of 2005 these arrangements were in the process of being withdrawn under pressure from other major trading powers, principally the United States. The withdrawal of these indirect subsidies to Caribbean producers is expected to favour the banana producers of Central America, in which American companies have an economic interest.”

  http://www.answers.com/bananas?gwp=11&ver=2.0.1.458&method=3

  Björn Lundahl
  Göteborg, Sweden
  

  Published: January 14, 2007 12:35 PM