August, 2008

Rethinking Protection of Competition and Competitors

Key materials
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Regulation is often a form of corporate welfare that may end up making society worse off. Evidence shows that many regulations are supported by industry to force out competitors and raise competitors’ cost. This behavior has the effect of raising prices for consumers and lowering the quality of goods and services they receive. In many cases, industries receive favorable support for their positions from consumer and environmental groups who may not be familiar enough with the industry to understand the anti-competitive effects of a particular regulation. What is often presented to regulators as a way to "level the playing field" in fact is a way of unevenly tilting the playing field (leveling the players in the field) in favor of those best positioned to influence regulatory bodies. Lost economic wellbeing is result of these anticompetitive activities. Modern economic science has focused on this problem for over three decades and has produced insights that can form the basis of policies that may reduce the losses associated with these problems.