This chapter describes the harms that abuse of buyer power causes including both exploitation of producers and exclusion of competing buyers. It highlights the global dimensions of the problems that abuse of buyer power is causing.
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A Global Issue
Peter C. Carstensen
Christian Koenig and Bernhard von Wendland
Regulation is the key to overcoming the tyranny of the marketplace in the pursuit of economic justice and welfare: it can prevent the abuse of economic dominance. Such abuse undermines a functioning market, the economic motor to producing welfare, sustainability and inclusiveness. Abuse of public capital is as omnipresent as the abuse of market dominance by private capital. The state can make major investments or compete with the private sector, or pick winners and subsidise them. Such interventions may be necessary e.g. to provide infrastructure. The wasteful allocation of public monies, however, can do immense harm: it can crowd out private investments, distort private incentives and help foreclosing markets. In any case, it deviates scarce funds from those who need them most. Therefore, regulation of state aid and public procurement is just as essential as regulation against the abuse of market dominance by private capital. State monopolies have been another public cause of economic exploitation until the recent past. Besides poor quality of service, consumer bondage within state monopolies used to entail much higher prices for services compared to liberalised markets in other jurisdictions. After liberalisation though, complex and well-adjusted regulation is crucial to induce functioning competition and to allocate the welfare benefits from liberalisation. Keywords: abuse of market dominance, liberalisation, state aid, states monopolies, regulation