An end to monopolies?

Posted on 27 June 2011 - 09:44am

R. Nadeswaran

THE voice of the man at the entrance to the railway station is loud and clear. Trying not to be drowned out by the noise of commuters entering and leaving, he looks at the word “Malaysia” on the T-shirt and makes an impassioned sales pitch: “One penny a minute to Malaysia.” You ignore him by saying “No, thank you” and stride past.
Sitting on the Underground, the poster across you stares at you and says: “The long distance call just got even longer. Get 200 minutes to call mobiles in Malaysia for £5 (RM24.79).”
The visitor to London may have done his mental calculations and may look at these offers as a bargain. But to regulars, these are just gimmicks because there are cheaper ways to call home from the comfort of your home.
Nine months ago, the home telephone, wi-fi and cable television came as a package from one company, which included free local calls in the evening and weekends.
A month after installation, the company called. “We notice that you are making overseas calls especially to Switzerland and Germany. Can we make you an offer? You pay us £3 (RM14.87) a month and all your calls will be billed at 10p (50 sen) per minute.”
Taken.
“We notice that you make calls during the day and we presume that this is done in the course of your work.”
“Yes”.
“Pay us £1.50 (RM7.44) a month and all your local calls are free.”
Taken.
“You are also calling mobile phone numbers for which we are charging you a minimum of 30p (RM1.49) a minute depending on the operator. If you add another £1.50, all calls to mobile numbers will not be charged.”
Taken.
Why are such offers being made? The answer lies in the word “competition”. When two or more service providers compete for clientele, the eventual benefactor is the consumer. Like millions of households in the United Kingdom, I have the choice of choosing the electricity or gas supplier. There is no monopoly and there is no compulsion to pick anyone.
Besides government regulators, there are ombudsmen which ensure that companies don’t form cartels or gang up to hike charges or take advantage of the market. They need only the slightest hint of price fixing or complaint to get into the act.
In the UK, the Competitions Commission keeps an eye not only on mobile charges but on all goods and services from airfares to water tanks and from advertising to video rentals. Last month, major banks started paying out billions of pounds after it was established that they mis-sold Payment Protection Insurance (PPI).
PPI was sold to millions of borrowers even when they did not need it, did not ask for it or in some cases, were not in a situation to ever be able to claim on it. While some customers found their PPI policies useful, a majority of those with the policies were found to have had them wrongly sold by their banks.
Industry regulators put pressure on the banks to compensate clients who had policies mis-sold to them, but the banks went to court to seek redress. A judicial review confirmed that the responsibility fell to the banks to ensure that payouts were given to wronged consumers.
In addition to the billions of pounds that lending institutions are paying out, they also face the additional costs of hiring staff to process the vast backlog of claims.
However, the commission has not been successful in all attempts to keep the market clean of cartels and price-fixing. Two weeks ago, it closed an investigation on complaints of price-fixing in the bicycle industry because of technicalities.
It notified 28 cycle retailers and wholesalers in March 2009 that it was investigating them for alleged collusion and intent to adjust prices across the industry. However, it was feared that its findings could be challenged on these technicalities.
With the Malaysian Competitions Commission already formed and taking shape, it would be interesting to note how it will investigate and handle complaints on conglomerates which hold a monopoly on some selected goods and services.
Commissioner Datuk Mohd Zain Mohd Dom has gone on record to warn hypermarkets which have been accused of “cornering” the market and driving out the traditional kedai runcit.
In an interview, he said: “Hypermarkets, foreign or local, given their inherent strengths, can dominate a market. Having a dominant position, what they do with that dominance will be within the purview of the Competition Act. If they abuse their dominant position to kill off the competition, they will be taken to task under the Act.”
That may not be the only immediate task. There have been complaints that some manufacturers with big promotional budgets are paying big bucks to supermarkets to have their products in prominent places for high visibility. Small companies do not have that kind of money to spare and are put in a disadvantageous situation. With both supermarkets and big manufacturers in dominant positions, there is help yet for the small fry from the Competitions Commission.
R. Nadeswaran hopes the Malaysian body will ensure the end of monopolistic companies which sometimes hold consumers to ransom. He is theSun’s UK correspondent based in London and is reachable at: citizen-nades@thesundaily.com