Comparison of Australias and the United States Competition Policies - Case Study Example

Student: Tutor: Course title: Course code: Institutional affiliation: Date of submission: Comparison of Australia’s and united states’ Competition policies A competition policy is a form of government intervention into the market to regulate the actions of businesses with an aim to promote competition and make capitalism work better for the benefit of the consumers and the population in general through efficient consumption of production resources and a fair playing ground for all businesses [Hun07]. Competition policy then achieves results such as ensuring that consumers have a wider choice and they are protected, ensuring adoption of technology to maximize efficiency and promoting price competition to reduce antitrust tendencies in a market [Mas04]. In Australia and in the United States, the governments have put in place policies to regulate competition in their respective markets. The implementation of the policies is entrusted to particular agencies in each country. In Australia, the Australian competition and consumer commission (ACCC) is mandated with implementing the competition policy [Aus131]. In the United States Federal Trade Commission (FTC) is in charge of ensuring the government’s competition policy is adhered to [Fed13]. This paper seeks to analyse the competition policies of these two countries. To highlight the different approaches used by each country and how effective they have been. Australia’s competition policy From the year 1950 up to the 80s, the Australian national economy had been on a downward trend. It dropped ten places from number 5 in the OECD GDP per capita ranking to 15. This necessitated quick reforms in the economy to deal with the deteriorating economic conditions. The general agreement was that the economy needed to be efficient enough to use resources optimally and ensure full productivity of the economy. The reforms introduced by the federal government in the late 80s were largely pro-competition as opposed to the earlier policies which sought to protect the economy and thus indirectly encouraged inefficiency [Mar06]. A national competition policy institution was established upon the consent of all governments in Australia. The progress of the reforms was to be monitored independently by the national competition council (NCC) [Nat13]. One of the most notable microeconomic reforms in Australia was the opening up of the economy to competition that was envisioned to achieve efficiency in production and in the market too. It involved removal of tariffs that protected local industries making them inefficient. It also involved deregulation of industries to allow for innovation and fair competition in the market. Protecting the market from competitive forces makes it inefficient and thus the reform aimed at eliminating inefficiency by opening up the market [Mar06]. The reforms were introduced in the Australian market in the 1980s. Towards the end of the 80s and the beginning of 90s, the economy had already started enjoying some fruits of the deregulation and strengthening of the economy reforms. A multifactor productivity averaging 2% for the first five years from 1990 to 1997 was recorded according to data from productivity commission of Australia. Allocative and productive efficiency were largely credited for the improvement of the economy. Production techniques and technology had improved considerably since the start of the reforms. The emergence of the service industry further enhanced the productivity of the economy through increased liquidity goods in the economy [Mar06]. United States’ competition policy The United States started its campaign against anti competitive activities earlier on than the Australia. United States established the federal trade commission in 1914 with the chief mandate of preventing unfair methods of competition in the US markets. The congress has enacted several laws to strengthen and broaden the mandate of the commission with an aim to totally reduce anticompetitive behavior in the economy [Fed13]. The United States has based its competitive policy on economic principles particularly on capitalistic economic principles which advocate for a fair competitive market where forces of demand and supply are supposed to regulate the prices of goods and services in the economy. The same forces are supposed to spur innovation in technology and production methods to ensure allocative efficiency where firms produce what is enough for the market incurring the lowest possible costs n order to the competitive. The competitive policy in the United States is implemented mostly through strict regulation. The competition policy is very much connected with the regulatory framework to ensure that anticompetitive tendencies which threaten the very sustainability of the United States economy are eliminated. The legal enforcement tools are very strong ensuring that competition [Rud01]. The original FTC act of 1914 prohibits any unfair method of competition. This has been defined vaguely in some instances leaving loopholes where the regulatory authorities cannot stop some form of uncompetitive behavior. However, the government of United States through the congress has enacted laws to strengthen the mandate and the powers of the FTC to stop any monopoly tendencies. This is to remove as much as possible any barriers to entry or barriers to trade that may exist. The idea is to promote free enterprise to enable high productivity of the united sates economy to have full employment of resources to grow the economy and create employment for the United States population. The FTC is particularly harsh when it comes to eliminating cartels and any one found to form illegal cartels is punished heavily by the government. There are exemptions however for some types of businesses meant to protect the businesses or the sector. They are not subjected to harsh precompetitive laws but instead approached in a unique way in order to promote their growth [Org11]. The united sates has also partnered with other major world economies to institute broad anti cartel laws and laws to inhibit anticompetitive practices with a view to making global trade sustainable for every player. The competition policy is above the regulatory restriction but its jurisdiction does not cover the many federal and state entities that operate in the United States. The result is a complicated competition policy where policy and regulatory matters conflict and interact regularly for common or divergent goals [Rud01]. Due to the complex nature of commerce and related business activities in the United States, there has been established different commission and bodies formed in various sectors to regulate competition activities specifically for the respective sectors. For example transportation sector has different authorities regulating activities of players in the industry. The air transport is regulated by the department of transportation (DOT). Rail transport is regulated by surface transportation board (STB). This is perhaps a move to increase the efficiency of the competition policy in the united sates which has a bias towards ensuring monopolies, cartels and antitrust actions by dominant players. The policy is tilting more towards protecting consumers and not to increase profitability of businesses and efficiency of the economy [Wis98]. From the highlights of the two competition policies; the united states’ policy and the Australia‘s policy it is evident that the policies pursue almost the same agenda of ensuring that businesses don’t engage in anti-competitive laws. This is in a view to protecting the consumers and ensuring maximum utilization of resources for economic productivity. The Australian policy seems to be implemented a lot by the ACCC which is the body mandated by the government in Australia to ensure harmful competition acts are not allowed taking place in the market. The United States’ policy has been implemented a lot using a regulatory approach through various bodies and agencies within different ranks of the government and also in different sectors of the economy. The result is a strict policy meant to deter inefficiency in the economy by monopolies [Rud01]. The government also strictly prohibits antitrust tendencies and illegal cartels as well as any from of price fixing by industry players in different sectors. The Australian ACCC seems to struggle to counter such behavior from players such as Woolworths and Coles who have pending cases on price fixing and anticompetitive behavior [Cor09]. It can therefore be said that the approach of the United States towards competition policy is more effective than it is for Australia. The Australian approach is more of supporting the state governments to deregulate their economies while for US it has been more of promoting competition through strict prohibition on anticompetitive practices. Conclusion It is the interest of any business to reduce the impact of competition as much as possible. Businesses would love to operate in an environment where competition does not exist at all. This is wishful thinking or an impossible reality. To reduce the effects of competition, businesses engage in anticompetitive activities such as price fixing, forming cartels and antitrust practices. The government then has to come in to curb such actions for the interests of the economy and the consumers. The policies by both Australia and the United States have a single intention but different approaches, while the Australian approach is more of deregulating the economy to make it efficient. The United States approach is on regulating the economy to lower the tendencies of monopoly and antitrust activities to ensure competition in the economy. References Hun07: , (Hunt, 2007), Mas04: , (Motta, 2004), Aus131: , (Australian-Competition-Consumer-Commision, 2013), Fed13: , (Federal Trade Commission , 2013), Mar06: , (Mckenzie, 2006), Nat13: , (National Competition Council , 2013), Rud01: , (Peritz, 2001), Org11: , (Organisation for Economic Co-operation and Development , 2011), Wis98: , (Wise, 1998), Cor09: , (Corden, 2009), Read More