eKourier Oct 2019

NEV’S NOTES

NEVS NOTES

Neville Kennard (1937 - 2012) Founder of Kennards Self Storage, enjoyed and was very passionate about expressing his ideas. These little gems have been appreciated by many in KSS. We will continue to publish his ideas that we have in stock. Enjoy!

COLLUSION IS OUR RIGHT

“Co-operation”, “collaboration” and “collusion”; they are similar expressions meaning slightly different but overlapping things.

Buyers may co-operate, they may assist each other to get the best price perhaps, or the best service; co-operation is seen as good, wholesome, beneficial. We co-operate with each other to our mutual advantage. And sometimes people collaborate, they may co-operatively and collabo- ratively work together to gain a benefit for themselves, their customers their friends or family. To collaborate is to gain a benefit for oneself, each-other, one’s customers, members. And then we may sometimes collude. That is to say, we may choose to co-operate and collaborate with friends or partners in a project, and we may choose to exclude someone we don’t like or trust. We may exclude someone from this venture, not coercively, not with any threat, but just because we choose to. We want to do without this party, and we exercise our freedom to collude to this end. But while co-operation and collaboration are seen as OK, collusion is seen as not OK. If force, fraud and coercion are absent, what is the problem? And how do you define “collusion” (which is supposed to be nasty, hence the scare-quotes) and co-operation and collaboration (which are supposed to be nice)? Competitors may co-operate with their service and pricing arrangements; suppliers may collaborate with each other to get the best deal from a supplier. And they might collude together to exclude another party, for reasons of their own which are of no one else’s business. But governments, while they themselves are great colluders and behave anti-competitively all the time, try to ban and legislate against collusion.

in the case of Alcoa in the US in 1945, when legislation forced them to increase their prices so other [less efficient] suppliers could compete. Thus Anti-Trust is often Anti Free Market. It can help the uncompetitive and inefficient at the expense of the efficient, and it can hurt customers and consumers. Often there are natural monopolies, as in the case of a lone petrol station in a country town, or a water-supplier in a city or a lone cinema in a suburb. There may just not be room for another such supplier. But customers can always choose to find alternative ways to satisfy their needs, or choose simply not to buy. It could be that two petrol stations in adjoining towns agree to sell petrol at the same price, and they should be free to thus “collude”. As long as other suppliers could open up in competition and there is no force fraud or coercion preventing them, then these “colluders” are free to do as they choose. In Australia we have the Competition and Consumer Commission, headed up at this time by a Graeme Samuel; this tax-payer-funded statist organisation’s mandate is: to “protect consumer rights, business rights, and obligations, perform industry regulation and price monitoring and prevent illegal anti-competitive behaviour”. An impossible and unneces- sary ask. In a free market this is all totally redundant; Mr Samuel and his staff could all get real jobs and make a positive contribution, instead of meddling and consuming taxes. We just need to get rid of the regulations and laws that inhibit competition. The freedom to co-operate, collaborate and collude is a fundamental freedom, and provided there is no force, fraud or coercion, is a freedom we must protect

My experience with attempts at price- fixing and cartels is that they are as strong as their weakest link and quite quickly break down, so any government intervention is redundant. The only free market monopoly that ever lasted, as far as I can ascertain, was the ALCOA monopoly on the supply of aluminium; ALCOA kept aluminium prices down to gain market share — against steel! Their prices were so cheap that no other aluminium producers could compete, so these uncompetitive suppliers did what uncompetitive businesses so often do, they complained to government on anti-trust grounds, and eventually forced Alcoa to raise their prices. So who were the losers and who were the winners from Alcoa’s cheap prices? The customers and the consumers lost, and the uncompeti- tive producers won. BUT WHILE CO-OPERATION AND COLLABORATION ARE SEEN AS OK, COLLUSION IS SEEN AS NOT OK Collusion is a fact of life. A group of friends may collude to have a game of golf, but they choose to exclude Fred who talks too much. Is this a bad thing, an act of anti-competitive behaviour. A group of businesses collaborate to do a bulk buy of widgets, but to exclude business X because they simply don’t want to include him, they don’t like him, and this may be labelled collusion. Nature abhors a vacuum and the market abhors a monopoly. So monopolies seldom last, unless of course the market accepts a monopoly, a sole supplier, because this supplier does a good and acceptable job at an acceptable price, as

October 7th, 2010

22 Kennards Kourier Oct 2019