The visible hand in economics

Archive for the ‘Antitrust’ Category

Yesterday I said that I thought the Bank’s speech on bringing down the price level was ridiculous. Not only is asking for a decline in prices a strange thing for a central bank to do, the mentioning of “oil companies” was slightly off the mark – given that they have slashed prices in the face of falling crude oil (although to be fair the Bank was just asking them to keep going – it was the Dom Post that exaggerated it – or maybe I was being generous!).

Now I am going to defend it.

Read the rest of this entry »


The Commerce Commission appears to have found an unusual source of anti-competitive behaviour: schools forcing parents to use a monopoly supplier of school uniforms. Apparently schools often accept payments from clothing manufacturers in exchange for exclusive rights to sell the school’s uniform. Then the manufacturers extract large rents from their monopoly position by charging high prices to parents.

The Commerce Commission is concerned about the monopoly position that the manufacturers have but, recognising the convenience of a single contractor, recommends that the schools use a tender process to ensure value for the parents. Read the rest of this entry »

I saw the new Bond flick, ‘Quantum of Solace’, over the weekend and I was amazed at how progressive it is. No longer does our alpha-male hero wreak destruction upon villains with moon bases, bent on world domination. His latest homicidal rampage is to prevent a new terror: oligopoly pricing. Read the rest of this entry »

For those of you who don’t subscribe to the Commerce Commission’s media releases, they have just announced that they are investigating mobile termination rates. (Reasons here). In simple terms, the termination rate is what vodafone charges telecom every time a telecom customer calls a vodafone customer and vice-versa. The CC has decided that the rates are probably too high so they have launched an investigation.

What is particularly interesting is that they are including Fixed to mobile (FTM) as well as Mobile to mobile (MTM) in this investigation. This is interesting because they already investigated FTM back in 2004 (see the ridiculous amount of submissions that occur ed during that investigation here). So pretty much everything is on the plate this time round. It will be interesting to see what happens:)


For those of you don’t read while they should be working, there are some really interesting tidbits on the latest article about the Warehouse pahsing out the extra concept.

It expected an annualised pre-tax improvement in trading earnings of about $9 million.

i.e. the extra concept has been hemorrhaging money!

Mr Morrice said it was the failure of the hoped-for halo effect – where grocery shoppers also bought general merchandise – that was the main reason for Extra’s dumping.

This has been Matt’s pet topic during this saga (posts here and here). The killer for the halo effect, and the reason why I’ve always believed the Extra concept would fail unless a supermarket owned the warehouse is summed up nicely by Tony Carter from Foodstuffs

“Clearly they did not have the scale”

and Mary Smith of Auckland

“I don’t come here that often. I find their prices expensive compared to the other supermarkets.”


One of the longer takeover sagas appears to have ended with the warehouse having announced its decision to end the warehouse extra format. This will effectively clear the way for either of the big two supermarkets to take over the warehouse. This is because the commerce commission is of the opinion that the warehouse would be a “maverick”. No-one really agrees on what this means so I won’t try and explain it, but given the ambiguity of the term it’s interesting the commission became so fixated on it.

For those of you who don’t know how competition law works you compare the factual of the merger going through with the counter factual of the merger not happening. With the warehouse extra no longer existing going forward, therefore emrger will not eliminate the “third player” from the grocery market and ehnce competition in the grocery market will be no different in the factual then in the counter factual.

Two things to look out for concerning this are

  • The Commission’s response
    They really don’t want this merger to happen
  • Whether or not the supermarket that takes over the warehouse rolls out extra in the future.
    We discussed on the blog before that we (at least I) think competition would actually be increased if one of the supermarkets is able to roll out the extra format.

Watch this space!


Telecom is being prosecuted by the Com Com for it’s adds related to the “Go Large” internet plan. I personally think it’s fair enough. The fine print of “fair use” plans means (although they are much more reasonable then they used to be) that you are severely punished interms of your download speed for fairly moderate usage. Hardly the “internet unleashed” as the ads described.

Now the citylink connection at my office, that is broadband unleashed!


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