There is nothing uncompetitive about collaboration

The Competition Commission is worrying me. In fact, it has been worrying me for quite a long time. I now read that it has fined the Natal Witness newspaper because it failed to notify the commission of a merger between it and Mandla-Matla for the provision of printing services.

The fine is R1-million. It comprises R800 000, to be paid by the Natal Witness, and R200 000, to be paid by Mandla-Matla.

I emphasise that I know nothing about this other than what I read in the media. But it just feels wrong to me. Mergers and acquisitions are a natural part of daily business. Also, the commission is supposed to protect the consumer against deliberate, dishonest action designed to exploit the consumer. Its purpose is not to regulate business, which, it seems to me, is what it does much of the time. My gripe about this Natal Witness thing is not just based on this issue but on a number of other issues which I have read about over some time now.

To me, an important part of competition or lack of competition is whether the consumer does not know about what is happening.

Let me provide some illustrative examples. Let us say that some enterprising fellow creates a tour company that specialises in helicopter rides over the Drakensberg. Let us assume that this company is the only one that offers that option. Then the company is entitled to charge whatever it likes. If it makes a good profit, ten out of ten for the company owner. The Competition Commission would have no business issuing the company with a fine because it was the only one.
So, let us assume that our helicopter tour company does really well, and makes a killing. What then is likely to happen, under the normal free market rules of competition, is that some other guy will start up a rival helicopter tour business. The two will then be competitors in the marketplace and prices will stabilise to be similar, unless one offers much more than the other, in which case the ‘better’ company will be able to charge more.

Let us assume that a year passes and then the original helicopter tour company decides to buy out the competition and so returns to a monopoly status. That is fine and well within the ‘rules’ of free market business. No problem. No need for the Competition Commission to interfere.

Now let me offer an alternative to this scenario. Let us imagine that the two competing helicopter tour companies are in business. Then the larger original tour company covertly approaches people in civil aviation authorities and bribes a few people to illegally withdraw the flying licence of the newer tour company. That is a case for the Competition Commission to investigate.

We can create a similar story for a fellow who, say, were to start selling carbon-fibre shoes. He could end up with a chain of 1 000 shoe shops all over the country, all specialising in carbon-fibre shoes. His chain could be the only provider of carbon-fibre shoes. That would be fine. Nothing wrong with that.
But then a conventional shoe shop starts importing carbon-fibre shoes from somewhere else and starts selling them at much cheaper prices.

Then, in our fictional story, the carbon-fibre shoe chain guy goes to the new importer and quietly agrees with him to fix the price at a high price so that they both make a lot of money. What is more, they ask their suppliers not to supply any other shoe shops. That would be a case for the Competition Commission. That would be a case for it because the public would not know of the covert agreement between the ‘competing’ shoe shops and would not know of the deal with the foreign suppliers not to supply others.

I cannot see where an old, well established and well respected newspaper going into a deal with a printer is causing the public any convert distress. I emphasise, I do not know all that went on behind the scenes in this case. However, I still feel that the fines levied on the major construction companies for building the soccer stadiums for the 2010 soccer World Cup were wrong. I did do a bit of personal investigation on that case and their mutual interaction, to me, seemed to be in the best interests of the consumer and the country.

Collaboration is not illegal or dishonest. But covert action intended to con the public is dishonest and immoral.

One must be very careful not to confused the two.