“Real Artists Ship”

Colin Johnson’s blog


Competition

Contemporary governments typically like competition, and also want to allow companies to act in a free market. Unfortunately, the free market also means that companies are free to purchase other companies, and regularly do so, usually in cognate areas to their current areas of business. This ends up creating uncompetitive situations where there are few buyers and sellers in a single area of business. To combat this, an interventionist scheme is usually put in place, whereby mergers and takeovers have to be approved by some governmental body. One of the occasions when that body will typically exercise that power is when the merger creates sufficiently few firms to compete effectively.

This is clumsy. It makes single, complex decision points and is prone to political intervention and bias. Perhaps instead, we could have a system that delegates this choice to the companies. For example, let’s imagine a graded scale of costs to register annually as a limited company. If you are registering in a business area where there are lots of players competing, then the cost is minimal—say, close to the cost of administering the registration. As the number of viable players gets smaller, the cost artificially ramps up very rapidly; if you are looking to merge two out of the last three remaining supermarket chains, then the annual registration cost is millions.

If, like me, you believe that hypothecation of taxes isn’t automatically to be avoided, you might even dedicate the sums earned from this to a fund to support startup/disruptor businesses in business areas with little competition.

The details are tricky. How do you set the cost, and the ramping? How do you define “the same business area”? How do you prevent formally distinct entities actually being controlled by the same entity in practice? But, these might not be insurmountable.

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