Market power abuses harm a country’s full productive development potential. How do they work and what are their effects?The abuses certain economic actors impose upon other actors and the population as a whole using the market power they have, are frequent in the entire world but especially in countries that do not count with a firm State, rooted in a full democracy. Many countries in the Southern Hemisphere, even where electoral victories have leaded progressive forces to the government, have only partially overcome the condition of ‘dumb States’; States with a poor capacity to regulate and control, among other issues, market power abuses.
This cannot be attributed to our governments’ shortsightedness or lack of determination, even though some mistakes in judgment and functioning are made in certain areas, including citizen security, organized crime, private and public corruption. The main factor sustaining market power abuses is the outrageous capacity to influence public and private decisions hegemonic economic forces have. Those forces operate freely in complicity, openly or covertly, with the media they control and with addicted sectors from the Judiciary, the political sphere and certain strategic think tanks.
There are very diverse ways to abuse market power and in these lines some of the most relevant are pointed out taking as reference articles that were already published in Opinion Sur and a recently approved Ecuadorian legislation 1/. This law of national reach faces ‘the abuse of economic operators who have market power, collusive agreements and other restrictive practices, operations of economic concentration and disloyal practices, seeking markets’ efficiency, fair trade and the common wellbeing of consumers and users.’ It is also stated that market power does not attempt per se against competitiveness, economic efficiency or common wellbeing but, if it did, it would constitute a behavior that would be subject to control, regulation and, if applicable, sanctions established by the Law.
Cases of market power abuse
Among others, the following:
(i) When certain economic actors affect the participation of other competitors through any means other than their own competitiveness or efficiency.
(ii) When an economic actor, using its capacity to set prices, alter production levels or manipulate a product’s commercialization, extracts value it did not generate from consumers or users, same as from its suppliers and, indirectly, from other stratum in its value chain.
(iii) When in commercial relationships an economic actor grants unequal conditions for equivalent transactions to different competitors as to harm some and favor others.
(iv) When sales are conditioned or bound to impose exclusivities harming other competitors that produce goods or services that are equal in price and quality.
(v) When a purchase demand or a sales supply of goods or services is unjustifiably denied.
(vi) When third parties are persuaded or coerced in order not to accept the purchase or sale of goods or services produced by competitors with lesser market power.
(vii) When agreements or contracts are subordinated to the acceptance of obligations, supplementary or conditioned benefits that, due to their nature or adjustment to commercial use, hold no relation to their purpose.
(viii) When access to a network or infrastructure that is essential in nature is denied in exchange for a reasonable fee.
(ix) When unjustified legal actions are resorted to as to restrict access or permanence of competitors in the market.
Effects and consequences
Whatever the modality in which they are performed, market power abuses harm a country’s full productive development potential. To begin with, there are many actors that are unable to materialize their productive contribution due to those abuses that marginalize or exclude them from the productive process. At the same time, the enormous wealth concentration that is holding back the world is reproduced through a constant extraction of value that appropriators do not generate. This way, market power abuses affect at a systemic level the development’s dynamic and stability, employment generation and fair distribution of incomes, the broadening of the tax base as to improve funding for public works and services. At the level of social actors, market power abuses affects the livelihood, dignity, self-esteem and creativity of a lot of people. Being aware of these risks, economic licentiousness cannot be tolerated: market power must be appropriately regulated and controlled in any society that aspires to become a full democracy (fair, vigorous, and caring).
A not less important problem is that market power is also exercised at an international level and there regulations and control are always one step behind from events. The issue is that large hegemonic economic forces that operate internationally, evading national regulations with every trick in the book, exercise an immense market power; using tax havens and triangulations with partner companies located in multiple jurisdictions, they have managed to accumulate vast resources and the necessary connections to adapt to their interests any international structure that seeks to subdue them. Blocks of emerging countries can play an important role in shaping a new, fairer and more sustainable economic and financial global order. However, a new factor that can be critical to transform global functioning is the growing and progressively more converging action of political and social movements from very diverse countries (affluent, emerging, left behind, impoverished) that, in general, up until quite recently only operated at a national level. A more potent and coordinated action to influence the spaces where decisions of global reach are conceived would help configure new democratic powers capable of transforming the dangerous course that currently attempts against our people’s wellbeing and the precious natural environment.
1. [Differentiating generation, redistribution and extraction of value->http://opinionsur.org.ar/Differentiating-generation?var_recherche=differentiating] and [Organic Law of Market Power Regulation and Control->http://www.planificacion.gob.ec/wp-content/uploads/downloads/2012/10/Ley-Organica.pdf ]