Coercive monopoly (3)

on   /   in Broken Links 12:54 am   /   Comments

By YUSUFU ABDULLAHI

This is the concluding part of the reaction on the need for a competition or anti-trust law in Nigeria. There were several reactions. But this was particularly interesting and I decided to let our readers have the benefit of knowing what is happening in some sectors of the Nigerian economy.

economyAlan Greenspan observes in his article, Antitrust that “if entry into a given field of production and service is not impeded by government regulations, franchises, or subsidies, the ultimate regulator of competition in a free economy is the capital market.

So long as capital is free to flow, it will tend to seek those areas which offer the maximum rate of return. Investors are constantly seeking the most profitable uses of their capital.

If, therefore, some field of production and service is seen to be highly profitable (particularly when the profitability is due to high prices rather than to low costs), businessmen and investors necessarily will be attracted to that field; and, as the supply of the product and service in question is increased relative to the demand for it, prices fall accordingly.

The capital market,” writes Mr. Greenspan “acts as a regulator of prices, not necessary of profits. It leaves an individual producer and service provider free to earn as much as he can by lowering his costs and by increasing his efficiency relative to others.

Thus it constitutes the mechanism that generates greater incentives to increase productivity and leads, as a consequence, to a rising standard of living.”

Now, if a company were able to gain and hold a non coercive monopoly, if it were able to win all the customers in a given field, not by special government granted privileges, but by sheer productive efficiency – by its ability to keep its costs low and /or to offer a better product or service than any competitor could – there would be no grounds on which to condemn such a monopoly. On the contrary, the company that achieved it would deserve the highest praise and esteem.

No one can morally claim the right to compete in a given field if he cannot match the productive efficiency of those with whom he hopes to compete. It is not free trade on a free market that creates coercive monopolies, but government legislation, government action, government controls.

Federal Ministry of Trade and Investment should therefore enact a Competition Law just like the Canadian Competition Act or the United States Antitrust Law or Sherman Act of 1890 in the USA, to guide corporate competition to boost the Nigeria economy. Canadian Competition Act is a Federal law intended to prevent monopolies that regulate Canadian business practices.

It is enforced by the Canadian Competition Bureau and Competition Tribunal, which oversees mergers, trade, and commerce practices that concern industry competition.

It ensures consumers have competitive products and prices. Without the Competition Law in Nigeria, the goals of ‘Nigeria Content’ in oil and gas sector would be difficult as explained under the Terms of Reference of the Committee for Free Zones Reform and also as emphasized by the 2006 Presidential Committee on Free Zones in that “NNPC through ‘Nigeria Content’ Division, develop synergy with Free Zones in order to ensure that their activities promote the achievement of significant local content in oil and gas related activities which will ultimately act as a driver for other sectors of the economy.”

Strategic Restructuring policy of the Reform Committee of Free Trade Zones and Export Processing Zones is tailored just around this philosophy to achieve above stated objective with Nigeria Content initiative. Competition amongst companies is therefore healthy to any economy because it breeds efficiency, brings cost of production down, reduce prices and increase general standard of livings.

Competition is therefore healthy to the Nigeria economy. Coercive Monopoly is very unhealthy, dangerous to the economy, increase cost of production, charges higher prices, depressed the economy, breeds corruption and ultimately lead to high unemployment.

 

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