Friday, February 22, 2008

Market Forces .... Part I

I've been preparing for my upcoming talk at Enterprise 2.0 Summit, hence my silence in the blogosphere. However during the last two weeks, the phrase "caveat emptor" has been ringing in my ears.

Let's start with groceries.

Under new rules put forward by the Competition Commission, planning proposals for new supermarket stores will face a competition test. This will in effect bar supermarkets with a certain number of stores from building new shops in that area. It is designed to increase competition.

According to the FT, Lucy Neville-Rolfe (a director of Tesco, the dominant supermarket in the UK) said of the proposals:

"We are against the competition test because we think it's wrong in terms of bureaucracy and economics." and "We're against growth cap- style regulation."

In other words, Government interference in the market is wrong, the market should regulate itself.

Hot on the heels of this, Tesco was again criticising the Competition Commission's proposal to introduce an ombudsman to ensure a level playing field between retailers and farmers. According to Farmers' Weekly, Lucy Neville-Rolfe said:

"Tesco considers that introducing a new ombudsman could be bureaucratic and an unnecessary cog in a supply chain which has worked well for consumers ..."

In other words, Government interference in the market is wrong, the market should regulate itself.

So we come to the latest fuss, which is supermarkets selling low cost alcohol, often as a loss leader to boost other grocery sales. According to the Times, Lucy Neville-Rolfe said:

“We can’t put up our prices because people will simply shop elsewhere – it could be commercial suicide - and we can’t act together to put up prices because that would be against competition law." and "The only safe solution is for the Government to initiate and lead these discussions and to bring forward legislative proposals which Tesco and others in our industry can support”

In other words, the market can't regulate itself, that's the Government's job.

This is a definite case of heads the market wins, tails the Government loses. As for Tesco's offer to work with the Government on possible legislation, I hope the Competition Commission remembers the words of Keynes:

"Capitalism is the astounding belief that the most wickedest of men will do the most wickedest of things for the greatest good of everyone"

In other words .... caveat emptor ... they've already got enough free publicity about their cheap booze.