DEFENSE LAW OF COMPETITION TO CONTROL PRICES AND BY INTENDENTS: A SERIOUS ERROR
Both President Macri and President Fernández have referred to the Competition Defense Law (“LDC”) as a tool to control prices. This undoubtedly represents a serious conceptual error. I understand that, more than ignorance on the matter, these manifestations would be a kind of psychological pressure towards market operators to try to contain prices.
The legal asset protected by the LDC is free competition between market operators and the proper functioning of the market structure. That is, it focuses on the relationships between competitors (eg price agreement or cartels) or on the behavior of competitors who have a privileged or dominant position with respect to other competitors, in such a way that they have the possibility of influencing training. of prices or quantities offered.
The LDC does not pursue price control. Only “indirectly” can influence prices when there are no distortions generated by competitors.
There are very few cases in which competition authorities analyze high prices, since they involve serious technical problems. For this exploitative behavior to occur, it is required, as a first step, that it be carried out by those competitors who have a monopoly or quasi-monopoly “dominant position”. The Chinese supermarket, the neighborhood pharmacy or the butcher shop are not monopolies. Neither are companies that are part of a market in which there is competition.
On the other hand, the technical difficulty of considering an abusive price derives from the fact that prices are, in the vast majority of cases, the result of the game of supply and demand, and of the fiscal and monetary policy of a country.
In other words, in a country where more is spent than is entered and currency is issued excessively, prices rise because currency is a good that is becoming less and less valuable. A glass of water in a downtown bar is worth nothing, because there are thousands; but a glass of water in the middle of the desert after a day without drinking and without the possibility of getting another close, is worth a fortune. So it is with tickets: the more there are, the less they are worth. And the competitors of a market are not to blame for this.
On the other hand, if 1,000 chinstraps were previously produced and 800 were sold, the chinstraps were priced by the game of supply and demand. On the other hand, if 1,000 masks are produced and there are 100,000 buyers, that scarce good is worth more, and somehow these masks must be assigned among all potential buyers: via price. And competition is not directly to blame for this either. Yes, the competitor will have it, which prevents another competitor from entering the market due to anti-competitive practices and thus can set higher prices alone. Here the defense of competition does intervene. Price protection is “indirect”.
The LCD is not a tool for price control. The solution to price increases in a competitive market, in a very exceptional and limited period of time, may be to regulate them. This with all the problems of shortages and informality that this implies. If a product by supply and demand is worth 1,000, and the government forces you to sell it at 500, many producers say not to sell or produce it, or to sell it in the unregistered market.
As the recent ruling of the Federal Civil and Commercial Chamber in the SADAIC case indicates (beyond the fact that I do not agree with the resolution of the ruling), there are very few cases in the world of exploitative price abuses, given the difficulties derived from determining the inexistence of a reasonable relationship between the economic value of a product and its price. This explains why the defense of competition fails when it is forced to solve cases in which the analyzed behavior is excessive prices or abusive price increases.
The ruling indicates that the tools that the defense of competition has to solve the problems generated by practices of abuse of a dominant position are indirect regulation of the markets (through sanctions or the imposition of obligations not to do) but that in no In this case, they directly control prices, quantities or other quantitative variables.
The price even considered “excessive” does not mean by itself that it is illegal or anti-competitive. One of the objectives of the LDC must be to protect the well-being of the consumer; However, the way in which this task is carried out is indirect, precisely through the sanction of practices that affect competition.
Therefore, we see that the LDC is not a price control tool.
INTENDENTS AS AUTHORITY OF COMPETITION
There are no world-wide authorities that non-technical authorities or that are not judges are the enforcement body of the competition law.
It does not exist in the world that a mayor is the enforcement authority of a competition law.
The analyzes to be carried out by the competition authority to determine that an operator has a dominant position (as we said, if it does not have a dominant position, the performance of an operator regarding abusive prices cannot be considered by the LDC) are extremely technical and complex.
It is necessary to determine the geographic market and the specific product, analyze the substitution of supply and demand, perform econometric calculations, etc., etc.
As the SADAIC ruling states, the price penalty requires that competition agencies be in a position to determine production costs, profit margin or reasonable profit –with the problem of considering improvements in process efficiency-, the return rates, an ideal comparison pattern (that is, an objective standard linked to the specific market, in the absence of a competitive price and the need to avoid purely theoretical comparison values), the percentage that above the hypothetical price would constitute an excess, the conduct that the defendant could have adopted if there had been a competitive market, etc.
Are the mayors of the entire country trained to carry out this task, which in the world is only carried out by specialized authorities?
With all due respect, this expression of wishes is impractical, and may lead to serious competition problems (who is competent in each case) for the current LDC enforcement authority, which is the Ministry of Internal Trade.