- The CRC Series on Competition, Regulation and Development
Edited by Paul Cook, Raul Fabella and Cassey Lee
Chapter 5: Establishing Consumers as Equivalent Players in Competition Policy
Kamala Dawar INTRODUCTION Competition is good for consumers. In markets where ﬁrms have to compete to persuade consumers to buy their products, consumer welfare is increased through greater choice and lower prices. In a competitive market, supply and demand determines the price and output of a good or service rather than the dominant behaviour of any one ﬁrm or the collusive behaviour of a group of ﬁrms. Many examples can be given to illustrate this general point. However, the purpose of this chapter is not to restate the virtues of competition for consumers or for economies but, primarily using research drawn from Consumers International members, to consider why competitive markets are diﬃcult to achieve, particularly in developing economies, and to examine the tension between the stated objectives and the actual impact of competition laws, especially in relation to consumer welfare. The evidence suggests that competition policies that give priority to the supply of competition, ensuring rivalry or contestability in the structure of markets (such as preventing barriers to entry or ensuring the fair conduct of ﬁrms) will not by themselves be suﬃcient to ensure a competitive outcome. These issues are primarily producer-oriented and do not directly aﬀect the demand for competition. Competition policy needs to incorporate complementary consumer policies aimed at ensuring that consumers can make informed and active choices in the marketplace. These choices send signals to producers, and in doing so trigger the development of more competitive markets. Thus, competition policy will be more e...
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