Anxiety due to close watch by MyCC

THE Malaysian Competition Commission (MyCC) has been closely monitoring the “price fixing” by various trade organisations.

Among those under the radar are the Poultry Farmers Association, Lorry Owners’ Association and the Flower Farmers’ Association. It is common knowledge that effective and sustainable “price fixing” for supernormal profit requires two prerequisites; small number of players and steep barriers of entry into the said industry.

The trade organisations singled out by MyCC are overwhelmed by numerous small players and with minimum barriers of entry, how can they effectively fix the prices for supernormal profit in the long run?

The so called “price fixings” by the trade organisations are in fact time-tested ways to regulate longterm sustainable supply of such goods and services at reasonable prices.

With minimum barriers of entry, if ever there is over-pricing, new entrants with increasing supply will eventually force down the prices.

In any business, there must be incentives to stay, the short-term profit opportunities are exactly the required ingredients for sustainable industry growth in the long run.

However, with the interference of MyCC, some players may call it quits since even the short-term profit opportunities have been effectively wiped out.

The reductions in supply will eventually push up prices to levels above the original prices fixed by the organisations.

The MyCC should instead focus on the “price-fixing” by government departments in their procurements and contracts given out to “rentseekers” and the suppliers and contractors of “negotiated deals”, “restricted tenders” or “closed-door tenders”.

These are the real offenders of non-competitive enterprises causing the citizens to perpetually pay high prices for substandard goods and services. YOONG CHOON FAH Kuala Lumpur