tag:theconversation.com,2011:/fr/topics/competition-846/articlesCompetition – The Conversation2024-03-28T00:03:01Ztag:theconversation.com,2011:article/2265122024-03-28T00:03:01Z2024-03-28T00:03:01ZThe US is suing Apple for anti-competitive behaviour. But the company’s walled-off tech ecosystem has driven its bold innovation<p>With an impressive 60% of the US smartphone market, Apple is undeniably big, but not a clear monopoly. </p>
<p>Yet, years of innovation by Apple have effectively given the company its own exclusive tech ecosystem. Now, the US Department of Justice (DOJ) has alleged this ecosystem is <a href="https://www.theverge.com/24107581/doj-v-apple-antitrust-monoply-news-updates">harming competition and innovation</a> through Apple’s unique market power. </p>
<p>The department’s lawsuit will face a few big hurdles. Perhaps chief among them: many of the “anti-competitive” systems Apple has built are the very things that enable the bold innovation they’re famous for. </p>
<h2>The charges</h2>
<p>Apple is the <a href="https://www.wsj.com/articles/justice-department-to-open-broad-new-antitrust-review-of-big-tech-companies-11563914235?mod=article_inline">latest modern major US tech firm</a> to face investigation into alleged anti-competitive behaviour by the US government. </p>
<p>The DOJ explains its <a href="https://storage.courtlistener.com/recap/gov.uscourts.njd.544402/gov.uscourts.njd.544402.1.0_3.pdfv">lawsuit</a> through five consumer-relatable examples of where Apple’s iPhone ecosystem stifles competition: </p>
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<img alt="A samsung phone open to WeChat on the phone's app store" src="https://images.theconversation.com/files/584652/original/file-20240327-18-d3fjtp.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/584652/original/file-20240327-18-d3fjtp.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/584652/original/file-20240327-18-d3fjtp.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/584652/original/file-20240327-18-d3fjtp.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/584652/original/file-20240327-18-d3fjtp.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/584652/original/file-20240327-18-d3fjtp.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/584652/original/file-20240327-18-d3fjtp.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">The department blames Apple’s closed tech ecosystem for a lack of US competitors to ‘super apps’ like WeChat.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/kazan-russian-federation-jun-15-2018-1149046790">Allmy/Shutterstock</a></span>
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<ol>
<li><p>the inability to give “<a href="https://www.bloomberg.com/news/newsletters/2024-03-25/did-apple-kill-super-apps-like-wechat-justice-department-thinks-so">super apps</a>” like WeChat full functionality on iPhone</p></li>
<li><p>restrictions on game streaming apps</p></li>
<li><p>a <a href="https://www.eff.org/deeplinks/2024/01/what-apples-promise-support-rcs-means-text-messaging?ref=platformer.news">functionality divide</a> between “blue bubble” and “green bubble” friends on iMessage</p></li>
<li><p>poor connectivity between non-Apple smartwatches and iPhones</p></li>
<li><p>digital wallet technology that locks out third parties.</p></li>
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Read more:
<a href="https://theconversation.com/why-are-apple-amazon-google-and-meta-facing-antitrust-lawsuits-and-huge-fines-and-will-it-protect-consumers-221501">Why are Apple, Amazon, Google and Meta facing antitrust lawsuits and huge fines? And will it protect consumers?</a>
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<p>In the US and other jurisdictions, the tech giant has already <a href="https://www.afr.com/companies/financial-services/apple-concedes-to-european-banks-amid-concern-on-new-rba-payment-power-20240122-p5ez45">taken steps</a> to address some of these concerns.</p>
<p>However, the DOJ stresses these complaints aren’t exclusive or exhaustive. They’re examples to show where Apple’s “closed” ecosystem locks customers into what Apple has built.</p>
<h2>Private innovation requires private infrastructure</h2>
<p>One problem for the DOJ is that the tech world has been left to private design for 30 years. Enjoying strong growth and innovation has meant relying on private infrastructure. </p>
<p>Having the most disruptive ideas might draw consumer attention, but vast infrastructures keep them as customers (for example, <a href="https://openai.com/blog/openai-and-microsoft-extend-partnership">OpenAI’s partnership with Microsoft</a>). </p>
<p>Our <a href="https://www.deakin.edu.au/faculty-of-arts-and-education/research/critical-digital-infrastructures-and-interfaces">research group</a> considers how digital innovations come to shape the “infrastructures” that guide our increasingly digital lives.</p>
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<img alt="An appple lightning connector and a USB C connector" src="https://images.theconversation.com/files/584657/original/file-20240327-28-6dl957.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/584657/original/file-20240327-28-6dl957.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/584657/original/file-20240327-28-6dl957.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/584657/original/file-20240327-28-6dl957.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/584657/original/file-20240327-28-6dl957.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/584657/original/file-20240327-28-6dl957.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/584657/original/file-20240327-28-6dl957.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Despite its long insistence on ‘lightning’ connectors, Apple had a major hand in developing USB-C technology.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/charging-cables-phone-on-black-background-1919745620">Ivan_Shenets/Shutterstock</a></span>
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<p>Consider Apple’s influence on the mundane and technical, such as <a href="https://9to5mac.com/2015/03/14/apple-invent-usb-type-c/">USB-C technology</a>. Or surprising cultural shifts, such as <a href="https://www.theguardian.com/technology/2016/sep/07/apple-airpods-launch-problems-with-wireless-headphones">Airpods</a>. And even how iPhone technology <a href="https://medium.com/@ignaziomottola/the-history-of-instagram-ff266eb75427">effectively launched Instagram culture</a>.</p>
<p>The DOJ’s core argument is that Apple’s business model has now shifted from leading innovation to gatekeeping its cultural-technical infrastructures. </p>
<p>Such shifts are not necessarily planned evils. Infrastructure can lead to further infrastructure with novel benefits: it is no accident internet fibre cables <a href="https://www.theatlantic.com/technology/archive/2015/11/how-railroad-history-shaped-internet-history/417414/">follow old rail lines</a> on land and telegraph cables undersea. </p>
<p>Over time, though, a combination of cultural-technical infrastructures built up by a powerful company can monopolise a market. To know that story’s end game, <a href="https://doctorow.medium.com/boeing-spirit-and-jetblue-a-monopoly-horror-story-c69fd6586afd#:%7E:text=Bill%20Clinton%27s%20administration%20oversaw%20the,dropping%20out%20of%20the%20sky.&text=As%20Matt%20Stoller%20says%2C%20America,but%20has%20no%20say%20over.">think Boeing</a>.</p>
<h2>Defining Apple’s monopoly</h2>
<p>Another problem for the DOJ is it will be hard to define the market that Apple allegedly monopolises or attempts to. Use of the <a href="https://www.archives.gov/milestone-documents/sherman-anti-trust-act#:%7E:text=The%20Sherman%20Anti%2DTrust%20Act%20authorized%20the%20federal%20government%20to,foreign%20nations%22%20was%20declared%20illegal.">1890 Sherman Anti-Trust Act</a> on firms requires such a definition. </p>
<p><div data-react-class="Tweet" data-react-props="{"tweetId":"1770830966669344908"}"></div></p>
<p>It makes sense the department is using this act against Google, which controls <a href="https://gs.statcounter.com/search-engine-market-share">more than 90%</a> of the search market. But Apple’s market share is far lower – not even a majority of mobile phone sales worldwide.</p>
<p>To get around this, the department argues the market that Apple does have is unique. Apple is famously good at creating its own markets – rehashing familiar things (hard drives and MP3 files) to make novel products (iPods) that “just work” for consumers and suppliers.</p>
<p>Apple’s competitive edge is creating the exclusive platforms it’s now being pursued for. </p>
<p>As many will remember, before the iPhone, browsing the internet on a phone wasn’t a thing. Before iTunes, digital music was a pain or illegal. </p>
<p>For millions of Apple fans across the US, the DOJ’s logic is a hard sell. </p>
<h2>A highly trusted middleman</h2>
<p>Notably repeated in this lawsuit is the need for “<a href="https://www.electronicmarkets.org/fileadmin/user_upload/doc/Issues/Volume_09/Issue_01-02/V09I1-2_Strategies_for_Internet_Middlemen_in_the_Intermediation-Disintermediation-Reintermediation_Cycle.pdf">disintermediation</a>”, which means removing the “middlemen” who take a cut between customers and suppliers.</p>
<p>The DOJ alleges Apple acts as such a middleman by imposing on consumer choice – whether by restricting Apple’s interoperability with other products, or charging a <a href="https://appleinsider.com/articles/23/01/08/the-cost-of-doing-business-apples-app-store-fees-explained">30% fee</a> (the so-called <a href="https://www.insightpartners.com/ideas/do-you-have-to-pay-the-apple-tax-its-complicated/#:%7E:text=%E2%80%9CApple%20Tax%E2%80%9D%20is%20a%20slang,subject%20to%20a%2030%25%20surcharge">Apple Tax</a>) to do business on Apple’s platforms. </p>
<p>The challenge is that in a world of bad actors on the internet (evil or incompetent), people actually seem to love Apple’s capacity to intermediate. </p>
<p>The company’s strict control of its apps, products and services enables growth across its platforms and has given it a <a href="https://www.cnet.com/tech/apple-long-a-champion-of-consumer-privacy-and-security-now-sits-at-a-crossroads/">reputation</a> for being an exceptional “middleman” for privacy, usability and other consumer concerns. </p>
<p>For example, Apple’s wallet launched to <em>not</em> transmit credit card numbers to merchants, who <a href="https://en.wikipedia.org/wiki/List_of_data_breaches">regularly suffer data breaches and leaks</a>. It <a href="https://birchtree.me/blog/digital-wallets-and-the-only-apple-pay-does-this-mythology/">offered an intermediary solution</a> where evil (and <a href="https://www.applicoinc.com/blog/happened-currentc-platform-innovation-fails/">incompetent</a>) actors abound.</p>
<figure class="align-center ">
<img alt="person pays using an Apple watch" src="https://images.theconversation.com/files/584653/original/file-20240327-18-4jjhqs.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/584653/original/file-20240327-18-4jjhqs.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/584653/original/file-20240327-18-4jjhqs.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/584653/original/file-20240327-18-4jjhqs.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/584653/original/file-20240327-18-4jjhqs.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/584653/original/file-20240327-18-4jjhqs.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/584653/original/file-20240327-18-4jjhqs.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Apple Wallet securely completes transactions without sharing credit card details with a merchant.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/person-paying-cafe-smart-watch-wirelessly-1298158189">Kaspars Grinvalds/Shutterstock</a></span>
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<p>The department’s <a href="https://storage.courtlistener.com/recap/gov.uscourts.njd.544402/gov.uscourts.njd.544402.1.0_3.pdf">claim</a> this practice creates an “additional point of failure for privacy and security” is incoherent.</p>
<p><a href="https://carnegieendowment.org/specialprojects/protectingfinancialstability/timeline">An extensive history of cybercrime incidents</a> around the world shows that for consumers, credit card companies and merchants, holding customer data becomes a liability, as well as an asset. </p>
<p>During the pandemic, Apple’s trusted ability to intermediate also fostered the success of “<a href="https://developer.apple.com/exposure-notification/">Exposure Notification</a>”, a privacy-preserving contact tracing system that kept personal exposure data away from governments and other parties.</p>
<p>But in other areas, the department argues that Apple has leveraged this reputation in self-serving ways. </p>
<p>Fortnite developer Epic Games’ <a href="https://appleinsider.com/articles/20/08/23/apple-versus-epic-games-fortnite-app-store-saga----the-story-so-far">ongoing stoush</a> with Apple over policies to charge 30% on in-app purchases is one key example. </p>
<figure class="align-center ">
<img alt="App store icon, epic games icon, both on a phone screen" src="https://images.theconversation.com/files/584663/original/file-20240327-18-jr4bml.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/584663/original/file-20240327-18-jr4bml.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/584663/original/file-20240327-18-jr4bml.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/584663/original/file-20240327-18-jr4bml.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/584663/original/file-20240327-18-jr4bml.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/584663/original/file-20240327-18-jr4bml.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/584663/original/file-20240327-18-jr4bml.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Epic Games sued Apple after being kicked off the App Store for adding a direct billing mechanism.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/app-store-vs-epic-games-concept-1967268796">mundissima/Shutterstock</a></span>
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<p>Many developers would likely have followed Epic in trying to get their customers cash out of Apple’s grasp, if not for <a href="https://www.wired.com/story/opinion-in-apples-war-on-developers-users-are-the-biggest-losers/">fear of retribution</a> from Apple. </p>
<p>Yet, Epic Games largely <a href="https://appleinsider.com/articles/20/08/23/apple-versus-epic-games-fortnite-app-store-saga----the-story-so-far">lost to Apple</a> in US courts, and this year the Supreme Court refused to hear the appeals. This loss may have compelled the DOJ to act.</p>
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Read more:
<a href="https://theconversation.com/apple-google-and-fortnites-stoush-is-a-classic-case-of-how-far-big-tech-will-go-to-retain-power-144728">Apple, Google and Fortnite's stoush is a classic case of how far big tech will go to retain power</a>
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<p>Even the success of this lawsuit won’t necessarily bring about useful change at Apple or for the consumer. </p>
<p>In Europe, the tech giant has already demonstrated an expert capacity for “<a href="https://proton.me/blog/apple-dma-compliance-plan-trap">malicious compliance</a>” – after meeting the European Union’s new <a href="https://commission.europa.eu/strategy-and-policy/priorities-2019-2024/europe-fit-digital-age/digital-markets-act-ensuring-fair-and-open-digital-markets_en">Digital Markets Act</a> policy in such bad faith that its solution barely works and is now being <a href="https://ec.europa.eu/commission/presscorner/detail/en/ip_24_1689">re-investigated</a>. </p>
<p>Overall, it’s not that Apple is necessarily, well, a “bad apple”, but that “<a href="https://www.justice.gov/opa/media/1344546/dl?inline">Apple vs USA</a>” allows us to think different about what really drives innovation in modern tech.</p><img src="https://counter.theconversation.com/content/226512/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Luke Heemsbergen does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The Department of Justice will have to prove that Apple’s ‘closed’ platforms have hurt rather than helped its customers.Luke Heemsbergen, Senior Lecturer, Digital, Political, Media, Deakin UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2260022024-03-24T19:06:54Z2024-03-24T19:06:54ZAustralia’s biggest chemist is merging with a giant wholesaler. Could we soon be paying more?<figure><img src="https://images.theconversation.com/files/582712/original/file-20240319-24-9w8vvm.jpg?ixlib=rb-1.1.0&rect=278%2C352%2C5095%2C1998&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/sydney-australia-oct-11-2019-outside-1714118746">Dr. Victor Wong/Shutterstock</a></span></figcaption></figure><p>Corporate Australia loves a big merger. And amid a <a href="https://ministers.treasury.gov.au/ministers/andrew-leigh-2022/articles/opinion-piece-merger-policy-critical#:%7E:text=The%20data%20show%20that%20larger,patent%20than%20an%20average%20firm.">growing flurry</a> of them across the business scene, a new blockbuster has emerged.</p>
<p>All eyes are on two titans of the pharmacy industry – Chemist Warehouse and Sigma Healthcare. They are poised to join forces under an <a href="https://www.abc.net.au/news/2023-12-11/chemist-warehouse-sigma-healthcare-merger-deal-explained/103213384">A$8.8 billion deal</a>, which could radically reshape the way Australians access medication and other health products. </p>
<p>Mergers can lower business operating costs and make companies more efficient. But reduced competition in any sector typically leads to <a href="https://www.accc.gov.au/business/competition-and-exemptions/misuse-of-market-power">higher prices</a> for consumers. </p>
<p>What could this deal by “Australia’s cheapest chemist” mean for everyday Australians and their wallets? </p>
<h2>An unmatched pharmacy giant</h2>
<p>If the proposed merger goes ahead, the new entity will be enormous – far bigger than any of its individual competitors. </p>
<p>It will <a href="https://investorcentre.sigmahealthcare.com.au/static-files/d2c377b3-f487-4488-b34d-43c02330e6b7">combine</a> the market power of about 600 existing Chemist Warehouse outlets with <a href="https://sigmahealthcare.com.au/our-background/">more than 1,200 pharmacies</a> currently aligned to Sigma as a wholesaler, giving it more than 26% market share.</p>
<p><iframe id="7TRHG" class="tc-infographic-datawrapper" src="https://datawrapper.dwcdn.net/7TRHG/2/" height="400px" width="100%" style="border: none" frameborder="0"></iframe></p>
<p>Sigma is listed on the Australian Stock Exchange (ASX), meaning its shares can already be bought and sold by the public. </p>
<p>Through the merger, privately owned Chemist Warehouse, whose <a href="https://www.afr.com/companies/retail/chemist-warehouse-records-surging-sales-profits-ahead-of-asx-debut-20240320-p5fdyj">surging profits</a> have excited potential investors, will also get a backdoor entrance to the ASX without undergoing a lengthy initial public offering process. </p>
<h2>Who the players are</h2>
<p>Chemist Warehouse has earned a reputation as the “<a href="https://www.afr.com/markets/equity-markets/like-bunnings-fund-managers-bullish-on-chemist-warehouse-20231212-p5eqsy">Bunnings of pharmacies</a>”, famous for its perceived affordability. </p>
<p>It has established a strong retail presence nationally, with franchise outlets stocking not only prescription and over-the-counter medicines, but also a <a href="https://www.morningstar.com.au/insights/personal-finance/235983/the-rise-and-rise-of-chemist-warehouse">huge range of other health products</a> such as vitamins, cosmetics and toiletries.</p>
<figure class="align-right ">
<img alt="Amcal pharmacy storefront signage" src="https://images.theconversation.com/files/583622/original/file-20240322-28-4ouual.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/583622/original/file-20240322-28-4ouual.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=451&fit=crop&dpr=1 600w, https://images.theconversation.com/files/583622/original/file-20240322-28-4ouual.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=451&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/583622/original/file-20240322-28-4ouual.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=451&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/583622/original/file-20240322-28-4ouual.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=566&fit=crop&dpr=1 754w, https://images.theconversation.com/files/583622/original/file-20240322-28-4ouual.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=566&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/583622/original/file-20240322-28-4ouual.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=566&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Sigma owns retail pharmacy brands, including Amcal.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/melbourne-australia-september-27-2015-allied-321194645">Nils Versemann/Shutterstock</a></span>
</figcaption>
</figure>
<p>Sigma Healthcare, on the other hand, operates retail pharmacy chains including Amcal and Discount Drug Store. </p>
<p>It is also one of <a href="https://www.afr.com/companies/retail/sigma-could-shed-customers-after-chemist-warehouse-merger-20231212-p5eqt6**">top three largest pharmaceutical wholesalers</a> in Australia, with a broad customer base.</p>
<p>This merger is a masterful blend of two <a href="https://www.masterclass.com/articles/horizontal-integration-explained">business strategies</a>: </p>
<ul>
<li>vertical integration – buying part of your own supply chain </li>
<li>horizontal integration – acquiring a competing business.<br></li>
</ul>
<p>The new entity will be able to independently source and sell its own products, fully controlling its own ecosystem of wholesale, distribution and retail pharmacies. </p>
<h2>How could this affect competition and consumers?</h2>
<p>Economic theory tells us that for consumers, mergers can be <a href="https://academic.oup.com/qje/article-abstract/120/2/701/1933966">a double-edged sword</a>. </p>
<p>On the one hand, they often increase business efficiency, scale and bargaining power. These cost savings may translate into lower prices for consumers.</p>
<p>In some industries, mergers have reduced prices by <a href="https://www.nber.org/papers/w31123">more than 5%</a>. </p>
<p>However, the decrease in competition brought about through a merger can allow companies to get away with charging <a href="https://www.brookings.edu/articles/the-consequences-of-increasing-concentration-and-decreasing-competition-and-how-to-remedy-them/">higher prices</a>, or even lowering the quality of their product offering.</p>
<p>Evidence from the US shows that in the <a href="https://www.investopedia.com/terms/c/cpg.asp">consumer packaged goods sector</a>, which includes drugs and other healthcare products, mergers <a href="https://www.nber.org/papers/w31123">increased prices</a> by 1.5% on average and lowered the total volume of goods sold by 2.3%.</p>
<figure class="align-center ">
<img alt="shelves containing various medications in Chemist Warehouse" src="https://images.theconversation.com/files/582715/original/file-20240319-16-xv7v5j.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/582715/original/file-20240319-16-xv7v5j.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=450&fit=crop&dpr=1 600w, https://images.theconversation.com/files/582715/original/file-20240319-16-xv7v5j.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=450&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/582715/original/file-20240319-16-xv7v5j.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=450&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/582715/original/file-20240319-16-xv7v5j.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=566&fit=crop&dpr=1 754w, https://images.theconversation.com/files/582715/original/file-20240319-16-xv7v5j.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=566&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/582715/original/file-20240319-16-xv7v5j.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=566&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">The prices of many prescriptions in Australia are tightly regulated under the pharmaceutical benefits scheme (PBS).</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/sydney-nsw-australia-march-20-2023-2277956295">Gerry H/Shutterstock</a></span>
</figcaption>
</figure>
<p>In Australia, tight regulation of prescription medications means there isn’t much leeway to increase prices for medicines covered under the <a href="https://www.pbs.gov.au/pbs/home">Pharmaceutical Benefits Scheme (PBS)</a>. </p>
<p>But Chemist Warehouse <a href="https://investorcentre.sigmahealthcare.com.au/static-files/d2c377b3-f487-4488-b34d-43c02330e6b7">earns</a> a whopping 67% of its revenue from its non-prescription “front of store” sales, compared to a rate of 27% at other Australian pharmacies. </p>
<p>This gives the giant a unique opportunity to capitalise on increased market power in the Australian context.</p>
<h2>Calls to increase competition</h2>
<p>There have long been <a href="https://www.pc.gov.au/research/supporting/competition-policy-review">calls</a> to enhance competition in Australia’s pharmacy sector. </p>
<p>The Harper <a href="https://www.pc.gov.au/research/supporting/competition-policy-review">National Competition Policy Review</a> singled out the <a href="https://www.guild.org.au/programs/seventh-community-pharmacy-agreement">Community Pharmacy Agreement</a> for stifling competition, saying its rigid location and ownership restrictions pose significant barriers for new players. </p>
<p>This has largely prevented Australia following in the steps of the United States and Europe, where deregulation in this industry has allowed consumers to <a href="https://www.ncbi.nlm.nih.gov/pmc/articles/PMC7911380/">buy over-the-counter medicines in supermarkets and gas stations</a>.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/a-loaf-of-bread-and-a-packet-of-pills-how-supermarket-pharmacies-could-change-the-way-we-shop-122640">A loaf of bread and a packet of pills: how supermarket pharmacies could change the way we shop</a>
</strong>
</em>
</p>
<hr>
<p>This merger stands to further weaken competition in an industry already held back by such restrictions.</p>
<h2>Australian retail is already highly concentrated</h2>
<p>Australia’s high level of industry concentration – where markets are controlled by a small number of large players – has found itself in the spotlight amid a stubborn cost of living crisis.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/flying-under-the-radar-australias-silent-and-growing-competition-crisis-212116">Flying under the radar: Australia's silent and growing competition crisis</a>
</strong>
</em>
</p>
<hr>
<p>One way to assess market concentration is to measure the share of the market held by the top four companies. </p>
<p>In Australia, the top four players in the pharmacy sector collectively hold <a href="https://www.ibisworld.com/au/market-size/pharmacies/">over 50% of the market</a>.</p>
<p>As industry concentration has intensified across other sectors, many larger Australian corporations have been seen to <a href="https://treasury.gov.au/sites/default/files/2023-11/competition-review-mergers-background-note.pdf">increase their price mark-ups and suppress wage growth</a>.</p>
<p>If successful, this merger will further entrench the pharmacy sector among banks, supermarkets and petrol retailers in the ranks of <a href="https://theconversation.com/flying-under-the-radar-australias-silent-and-growing-competition-crisis-212116">the most concentrated Australian industries</a>. </p>
<h2>Will it go ahead?</h2>
<p>There are still significant hurdles for this merger to go ahead. </p>
<p>The move has to be approved by shareholders in both companies, and more importantly, receive a green light from the ACCC, Australia’s competition watchdog.</p>
<figure class="align-right ">
<img alt="A mobile phone open to the homepage of the ACCC website" src="https://images.theconversation.com/files/583624/original/file-20240322-20-tqaufc.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/583624/original/file-20240322-20-tqaufc.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=337&fit=crop&dpr=1 600w, https://images.theconversation.com/files/583624/original/file-20240322-20-tqaufc.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=337&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/583624/original/file-20240322-20-tqaufc.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=337&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/583624/original/file-20240322-20-tqaufc.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=424&fit=crop&dpr=1 754w, https://images.theconversation.com/files/583624/original/file-20240322-20-tqaufc.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=424&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/583624/original/file-20240322-20-tqaufc.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=424&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">The ACCC is not always able to block large mergers.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/stuttgart-germany-03252023-mobile-phone-webpage-2282182035">T. Schneider/Shutterstock</a></span>
</figcaption>
</figure>
<p>Submissions to the ACCC’s <a href="https://www.accc.gov.au/public-registers/mergers-registers/public-informal-merger-reviews/sigma-healthcare-limited-chemist-warehouse-group-holdings#:%7E:text=Submissions%20are%20invited%20from%20interested,Warehouse%20%E2%80%93%20attention%20Isobel%20Graham%22.">formal enquiry</a> into the merger will close this week. </p>
<p>However, the ACCC has struggled to block similar mergers in the past, such as the seismic <a href="https://www.afr.com/companies/financial-services/accc-admits-defeat-on-blocking-anz-s-4-9b-takeover-of-suncorp-s-bank-20240305-p5fa35">ANZ-Suncorp deal</a> that was finally approved in February. Regulatory obstacles alone may not be enough to prevent this consolidation.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/anzs-takeover-of-suncorp-will-reduce-bank-competition-but-will-that-be-enough-to-block-it-187279">ANZ's takeover of Suncorp will reduce bank competition – but will that be enough to block it?</a>
</strong>
</em>
</p>
<hr>
<p>Australians have a vested interest in a healthy competitive landscape. Reduced competition in the pharmacy sector will affect the pricing pressures on every store, not just the major players. </p>
<p>Don’t be surprised down the road if a visit to your local pharmacy shocks you with pricier cosmetics, sunglasses and even jellybeans!</p><img src="https://counter.theconversation.com/content/226002/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Angel Zhong does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The new retail giant will control more than 26% of the Australian pharmacy market.Angel Zhong, Associate Professor of Finance, RMIT UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2240662024-02-21T07:15:56Z2024-02-21T07:15:56ZBrad Banducci checks out from Woolworths, signalling a business out-of-touch with its customers<p>The head of Australia’s biggest supermarket chain is to step down. On the face of it, this is not altogether remarkable news. Australian CEOs hold their jobs, on average, for about five years.</p>
<p>Woolworth’s chief executive <a href="https://www.abc.net.au/news/2024-02-21/woolworths-brad-banducci-retires-announcement/103490636">Brad Banducci</a> has done nearly nine years at the helm, which is worthy of attention because it’s Woolworths. The brand has about 1,400 stores nationwide and boasts a <a href="https://www.huntexportadvice.com/post/australia-market-overview-2021">37% share of the grocery sector</a>. It’s big and that’s the issue underpinning Banducci’s exit.</p>
<p>Commentators, including the former ACCC chief Rod Sims have bemoaned the <a href="https://www.smh.com.au/politics/federal/capitalism-must-come-with-rules-to-ensure-competition-sims-20230202-p5chgx.html">lack of competition</a> within the sector. Woolworths and rival Coles enjoy a 65% share of the Australian market. I give a nod to the respected Sims as he plays a bit-part in the Banducci departure, which clearly did not go to plan. An <a href="https://www.woolworthsgroup.com.au/au/en/media/latest-news/2023/retirement-of-managing-director---group-chief-executive-officer.html">announcement</a> confirming the CEO’s retirement was made Wednesday morning.</p>
<h2>The Four Corners interview</h2>
<p>That announcement followed a woeful media interview by Banducci for the ABC’s <a href="https://www.abc.net.au/news/2024-02-21/woolworths-brad-banducci-retires-announcement/103490636">Four Corners</a> program. In light of the ongoing cost-of-living crisis affecting all parts of the country, there’s been much said about this overly concentrated grocery market and its impact on ordinary Australians.</p>
<p>So, it would come as no surprise to the Woolworths communications team that such questions would be put to their boss, but the boss appeared ill-prepared and defensive.</p>
<p><div data-react-class="Tweet" data-react-props="{"tweetId":"1759391473567490367"}"></div></p>
<p>Banducci labelled Sims as out-of-touch with current market dynamics as he reminded the interviewer and viewers that the former public servant is now “retired”. This was a hapless point to make, which Banducci quickly recognises and unsurprisingly, was rather keen to remove from the interview.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/8-ways-woolworths-and-coles-squeeze-their-suppliers-and-their-customers-223857">8 ways Woolworths and Coles squeeze their suppliers and their customers</a>
</strong>
</em>
</p>
<hr>
<p>The program’s refusal to play ball prompted Banducci to get out of his chair and stop the interview. The Woolworths attendants successfully persuade him to continue, but from a reputational perspective, the damage was done.</p>
<h2>The final straw</h2>
<p>So, was the ABC program instrumental in Banducci’s unforeseen announcement? Yes, but it’s not without important context; principally, the state of Woolworths’ financial health, considering that duopoly-like situation. The Woolworths group’s results, released on the same day as the executive’s announcement, showed a <a href="https://www.woolworthsgroup.com.au/au/en/investors/our-performance/results-and-presentations.html">$781 million loss</a>, although much of this was due to a couple of major write-downs.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/i-analysed-more-than-10-000-reddit-posts-on-supermarket-pricing-5-key-themes-emerged-221119">I analysed more than 10,000 Reddit posts on supermarket pricing. 5 key themes emerged</a>
</strong>
</em>
</p>
<hr>
<p>This brings us back to the Four Corners interview and the inherent optics of Banducci’s performance, who, it must be said, is normally unflappable when it comes to such questioning. </p>
<p>For further context, this is a big year for the grocer, Woolworths opened its first store in Sydney in <a href="https://www.woolworthsgroup.com.au/au/en/about-us/our-history.html#:%7E:text=On%20Friday%2C%205%20December%201924,where%20good%20things%20are%20cheap.">December 1924</a> and much, no doubt, is planned to mark the centenary. </p>
<p>This will be an occasion to reinforce those corporate messages that will probably speak to the brand’s humble beginnings and being a supportive part of Australian communities over that time. In short, Woolworths is Australia, but the Banducci performance demonstrated it wasn’t Rod Sims who was out-of-touch, it was our friendly, neighbourhood grocer.</p>
<h2>Out of touch</h2>
<p>The program and the surrounding debate about supermarket profits at a time of hardship for many is a painful reminder that those modest beginnings have long gone and now it’s more akin to “us and them”. Woolworths needs to reclaim those ordinary, perceived simple beginnings and be seen as a community member again.</p>
<p>The grocer’s recent <a href="https://ami.org.au/knowledge-hub/woolworths-ceo-responds-to-backlash-over-decision-to-not-stock-australia-day-merchandise/">Australia Day</a> ruckus illustrates a brand that has lost a sense of self-identity. This is not to judge the decision either way, but to underline the importance of first consulting the community.</p>
<h2>Controlling the narrative</h2>
<p>Banducci will be replaced by Woolworths veteran, <a href="https://www.news.com.au/finance/business/retail/amanda-bardwell-to-replace-brad-banducci-as-woolworths-ceo/news-story/2050798ae36d089be7e979144e8cbc02">Amanda Bardwell</a>. Bardwell will be the 13th chief executive and knows the business well. The appointment affords Woolworths the much-needed opportunity to start controlling the corporate narrative, which has, in recent weeks, been driven by the media and centres solely on the numbers – specifically, how much is being made by the business and how little of that is, seemingly, making its way to the customer.</p>
<p>The Woolworths <a href="https://www.woolworthsgroup.com.au/au/en/about-us/our-approach-/our-purpose--key-priorities.html#:%7E:text=Our%20Purpose%20%26%20Key%20Priorities&text=At%20Woolworths%20Group%2C%20we%20create,play%20in%20driving%20positive%20change.">purpose</a> speaks of “the communities in which we serve” and creating “a better tomorrow” – to that end, the business should do its darndest to give those communities greater attention.</p>
<p>The Woolworths advertising in 1924 described the store as a place where “goods are so cheap and shopping easy and pleasant”. So, in an attempt to control the story in 2024, Amanda Bardwell would do well going back to when it all started. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/why-prices-are-so-high-8-ways-retail-pricing-algorithms-gouge-consumers-223310">Why prices are so high – 8 ways retail pricing algorithms gouge consumers</a>
</strong>
</em>
</p>
<hr>
<img src="https://counter.theconversation.com/content/224066/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Peter Roberts does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Woolworths promoted itself as a place where “goods are so cheap and shopping easy and pleasant” when it opened 100 years ago. Australia’s biggest grocer has moved away from its humble beginnings.Peter Roberts, Lecturer, School of the Arts and Media, UNSW SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2233102024-02-15T19:03:47Z2024-02-15T19:03:47ZWhy prices are so high – 8 ways retail pricing algorithms gouge consumers<figure><img src="https://images.theconversation.com/files/575804/original/file-20240215-28-d833it.jpeg?ixlib=rb-1.1.0&rect=114%2C175%2C1776%2C1011&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p>The just-released report of the inquiry into <a href="https://pricegouginginquiry.actu.org.au/">price gouging and unfair pricing</a> conducted by Allan Fels for the Australian Council of Trades Unions does more than identify the likely offenders.</p>
<p>It finds the biggest are supermarkets, banks, airlines and electricity companies.</p>
<p>It’s not enough to know their tricks. Fels wants to give the Australian Competition and Consumer Commission more power to investigate and more power to prohibit mergers.</p>
<p>But it helps to know how they try to trick us, and how technology has enabled them to get better at it. After reading the report, I’ve identified eight key maneuvers.</p>
<h2>1. Asymmetric price movements</h2>
<p>Otherwise known as <a href="https://www.jstor.org/stable/25593733">Rocket and Feather</a>, this is where businesses push up prices quickly when costs rise, but cut them slowly or late after costs fall.</p>
<p>It seems to happen for <a href="https://www.sciencedirect.com/science/article/abs/pii/S0140988323002074">petrol</a> and <a href="https://www.sciencedirect.com/science/article/abs/pii/S105905601730240X">mortgage rates</a>, and the Fels inquiry was presented with evidence suggesting it happens in supermarkets. </p>
<p>Brendan O’Keeffe from NSW Farmers told the inquiry wholesale lamb prices had been falling for six months before six Woolworths announced a cut in the prices of lamb it was selling as a “<a href="https://pricegouginginquiry.actu.org.au/wp-content/uploads/2024/02/InquiryIntoPriceGouging_Report_web.pdf">Christmas gift</a>”. </p>
<h2>2. Punishment for loyal customers</h2>
<p>A <a href="https://theconversation.com/simple-fixes-could-help-save-australian-consumers-from-up-to-3-6-billion-in-loyalty-taxes-119978">loyalty tax</a> is what happens when a business imposes higher charges on customers who have been with it for a long time, on the assumption that they won’t move.</p>
<p>The Australian Securities and Investments Commission has alleged a big <a href="https://theconversation.com/how-qantas-might-have-done-all-australians-a-favour-by-making-refunds-so-hard-to-get-213346">insurer</a> does it, setting premiums not only on the basis of risk, but also on the basis of what a computer model tells them about the likelihood of each customer tolerating a price hike. The insurer disputes the claim.</p>
<p>It’s often done by offering discounts or new products to new customers and leaving existing customers on old or discontinued products.</p>
<p>It happens a lot in the <a href="https://www.finder.com.au/utilities-loyalty-costing-australians-billions-2024">electricity industry</a>. The plans look good at first, and then less good as providers bank on customers not making the effort to shop around. </p>
<p>Loyalty taxes appear to be less common among mobile phone providers. Australian laws make it easy to switch <a href="https://www.reviews.org/au/mobile/how-to-switch-mobile-carriers-and-keep-your-number/">and keep your number</a>.</p>
<h2>3. Loyalty schemes that provide little value</h2>
<p>Fels says loyalty schemes can be a “low-cost means of retaining and exploiting consumers by providing them with low-value rewards of dubious benefit”. </p>
<p>Their purpose is to lock in (or at least bias) customers to choices already made. </p>
<p>Examples include airline frequent flyer points, cafe cards that give you your tenth coffee free, and supermarket points programs. The purpose is to lock in (or at least bias) consumers to products already chosen. </p>
<p>The <a href="https://www.accc.gov.au/consumers/advertising-and-promotions/customer-loyalty-schemes">Australian Competition and Consumer Commission</a> has found many require users to spend a lot of money or time to earn enough points for a reward. </p>
<p>Others allow points to expire or rules to change without notice or offer rewards that are not worth the effort to redeem.</p>
<p>They also enable businesses to collect data on spending habits, preferences, locations, and personal information that can be used to construct customer profiles that allow them to target advertising and offers and high prices to some customers and not others.</p>
<h2>4. Drip pricing that hides true costs</h2>
<p>The Competition and Consumer Commission describes <a href="https://pricegouginginquiry.actu.org.au/wp-content/uploads/2024/02/InquiryIntoPriceGouging_Report_web.pdf">drip pricing</a> as “when a price is advertised at the beginning of an online purchase, but then extra fees and charges (such as booking and service fees) are gradually added during the purchase process”. </p>
<p>The extras can add up quickly and make final bills much higher than expected. </p>
<p>Airlines are among the best-known users of the strategy. They often offer initially attractive base fares, but then add charges for baggage, seat selection, in-flight meals and other extras.</p>
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<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/junk-fees-and-drip-pricing-underhanded-tactics-we-hate-yet-still-fall-for-211117">Junk fees and drip pricing: underhanded tactics we hate yet still fall for</a>
</strong>
</em>
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<h2>5. Confusion pricing</h2>
<p>Related to drip pricing is <a href="https://www.x-mol.net/paper/article/1402386414932836352">confusion pricing</a> where a provider offers a range of plans, discounts and fees so complex they are overwhelming.</p>
<p>Financial products like insurance have convoluted fee structures, as do electricity providers. Supermarkets do it by bombarding shoppers with “specials” and “sales”. </p>
<p>When prices change frequently and without notice, it adds to the confusion. </p>
<h2>6. Algorithmic pricing</h2>
<p><a href="https://pricegouginginquiry.actu.org.au/wp-content/uploads/2024/02/InquiryIntoPriceGouging_Report_web.pdf">Algorithmic pricing</a> is the practice of using algorithms to set prices automatically taking into account competitor responses, which is something akin to computers talking to each other.</p>
<p>When computers get together in this way they can <a href="https://www.x-mol.net/paper/article/1402386414932836352">act as it they are colluding</a> even if the humans involved in running the businesses never talk to each other.</p>
<p>It can act even more this way when multiple competitors use the same third-party pricing algorithm, effectively allowing a single company to influence prices.</p>
<h2>7. Price discrimination</h2>
<p>Price discrimination involves charging different customers different prices
for the same product, setting each price in accordance with how much each customer is prepared to pay.</p>
<p>Banks do it when they offer better rates to customers likely to leave them, electricity companies do it when they offer better prices for business customers than households, and medical specialists do it when they offer vastly different prices for the same service to consumers with different incomes.</p>
<p>It is made easier by digital technology and data collection. While it can make prices lower for some customers, it can make prices much more expensive to customers in a hurry or in urgent need of something.</p>
<h2>8. Excuse-flation</h2>
<p><a href="https://www.bloomberg.com/news/articles/2023-03-09/how-excuseflation-is-keeping-prices-and-corporate-profits-high">Excuse-flation</a> is where general inflation provides “cover” for businesses to raise prices without
justification, blaming nothing other than general inflation.</p>
<p>It means that in times of general high inflation businesses can increase their prices even if their costs haven’t increased by as much.</p>
<p>On Thursday Reserve Bank Governor <a href="https://www.afr.com/policy/economy/inflation-is-cover-for-pricing-gouging-rba-boss-says-20240215-p5f58d">Michele Bullock</a> seemed to confirm that she though some firms were doing this saying that when inflation had been brought back to the Bank’s target, it would be </p>
<blockquote>
<p>much more difficult, I think, for firms to use high inflation as cover for this sort of putting up their prices</p>
</blockquote>
<h2>A political solution is needed</h2>
<p>Ultimately, our own vigilance won’t be enough. We will need political help. The government’s recently announced <a href="https://treasury.gov.au/review/competition-review-2023">competition review</a> might be a step in this direction.</p>
<p>The legislative changes should police business practices and prioritise fairness. Only then can we create a marketplace where ethics and competition align, ensuring both business prosperity and consumer wellbeing. </p>
<p>This isn’t just about economics, it’s about building a fairer, more sustainable Australia.</p><img src="https://counter.theconversation.com/content/223310/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>David Tuffley is affiliated with the Australian Computer Society (Member).</span></em></p>Each of these tricks is old, but each has been supercharged by the use of information technology.David Tuffley, Senior Lecturer in Applied Ethics & CyberSecurity, Griffith UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2170402024-01-17T19:50:11Z2024-01-17T19:50:11ZBig dreams and high demands: The mental health challenges of elite youth athletes<figure><img src="https://images.theconversation.com/files/569667/original/file-20240116-25-tskkz8.jpg?ixlib=rb-1.1.0&rect=215%2C17%2C5775%2C3889&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">A recent study found that 41 per cent of Canadian Olympic and Paralympic athletes met the criteria for one or more mental disorders, such as depression, anxiety or eating disorders.</span> <span class="attribution"><span class="source">(Shutterstock)</span></span></figcaption></figure><p>Elite sport poses several unique pressures that can impact athletes’ mental health. </p>
<p>Demanding travel schedules and intense <a href="https://doi.org/10.1080/02640410500131480">competition pressures</a> can lead to negative emotional experiences. Athletes can <a href="http://dx.doi.org/10.1136/bjsports-2016-096731">become injured</a>, or they may be <a href="https://doi.org/10.1016/j.jsams.2017.04.018">uncertain about their future career</a> in sport. </p>
<p>Unfortunately, some athletes may also face <a href="https://doi.org/10.1177/08862605211045096">physical, psychological or sexual abuse</a> in their sport. </p>
<h2>Pressures of elite sport</h2>
<p>Research has shown that elite athletes can experience mental health issues at rates equal to or higher than the general population. A <a href="https://doi.org/10.1016/j.psychsport.2021.102018">recent study</a> found that 41 per cent of Canadian Olympic and Paralympic athletes surveyed met the criteria for one or more mental disorders, such as depression, anxiety or eating disorders. </p>
<p><a href="https://doi.org/10.1007/s40279-020-01266-z">Another study</a> involving Australian elite athletes revealed that they were nearly twice as likely to experience significant psychological distress compared to the broader community.</p>
<p>Even though elite athletes often have many resources to support them, <a href="https://doi.org/10.1037/spy0000319">they may feel it is hard to reach out and ask for help</a>. When left untreated, mental health challenges and performance pressures can lead to athletes feeling burned out or wanting to drop out of their sport, and they may even experience <a href="http://dx.doi.org/10.1136/bjsports-2019-101386">feelings of hopelessness and suicidal thoughts</a>. </p>
<p>Young people engaged in elite sport might be at even greater risk. </p>
<h2>Who are elite youth athletes?</h2>
<p>Reaching the highest levels of performance often requires athletes to <a href="http://dx.doi.org/10.1080/16184742.2017.1324503">specialize</a> in their sport during their teenage years, and <a href="https://olympics.com/en/news/age-number-youngest-olympians-2021-tokyo-2020-athletes">several athletes competing at the Olympic Games are adolescents</a>. There are numerous clubs, leagues and <a href="https://sportpourlavie.ca/wp-content/uploads/2016/12/Sport-Schools-in-Canada.pdf">schools</a> that focus on elite youth sport specialization, and there will be 1,900 athletes taking part in the <a href="https://olympics.com/en/gangwon-2024/">Youth Olympic Games</a> Jan. 19 to Feb. 1, 2024. </p>
<p>Clearly, youth athletes are already competing at elite levels or hope to reach elite levels in their sport.</p>
<p>While the term “elite youth athlete” can be tricky to define, <a href="https://doi.org/10.1177/19417381231219230">we use the term</a> to describe youth athletes who are training in sport settings that have a primary focus on achieving superior performance, with the explicit or implicit goal of moving to adult elite, collegiate or professional sports. </p>
<p>Elite youth sport environments may prioritize spending time on sport activities instead of school or relationships with friends outside of sport. These settings can provide the training and specialized skills needed to become an elite performer, but they may also pose risks to the mental health of young athletes.</p>
<h2>Mental health among elite youth athletes</h2>
<figure class="align-center ">
<img alt="A swimmer training alone in a pool" src="https://images.theconversation.com/files/569462/original/file-20240116-19-i1hpc0.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/569462/original/file-20240116-19-i1hpc0.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=388&fit=crop&dpr=1 600w, https://images.theconversation.com/files/569462/original/file-20240116-19-i1hpc0.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=388&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/569462/original/file-20240116-19-i1hpc0.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=388&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/569462/original/file-20240116-19-i1hpc0.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=487&fit=crop&dpr=1 754w, https://images.theconversation.com/files/569462/original/file-20240116-19-i1hpc0.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=487&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/569462/original/file-20240116-19-i1hpc0.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=487&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Perfectionism is common among athletes, and strongly linked with poor mental health outcomes.</span>
<span class="attribution"><span class="source">(Unsplash/Jonathan Chng)</span></span>
</figcaption>
</figure>
<p>Some pressures that are unique to elite youth athletes include early specialization and over-training, having critical or demanding coaches and parents, poor sleep, and trying to balance educational and social needs with increasingly professionalized sporting demands. <a href="https://theconversation.com/5-ways-pressuring-young-athletes-to-perform-well-does-them-harm-186699">These factors can all affect the well-being of youth elite athletes</a>. </p>
<p>Perhaps especially related to elite sport, <a href="https://theconversation.com/how-perfectionism-became-a-hidden-epidemic-among-young-people-89405">young people around the world are reporting unprecedented levels of perfectionism</a>. Perfectionism is common among athletes, and strongly linked with poor mental health outcomes. </p>
<p>Beyond the pressures of elite sport environments, young people experience the heaviest burden of mental ill-health. For young people around the world, <a href="https://doi.org/10.1038/s41380-021-01161-7">the peak age at onset for a mental health disorder is 15, and approximately half of these disorders occur before the age of 18</a>. There are many reasons why young people’s mental health is at such high risk, including increasingly troubling <a href="https://doi.org/10.1007/s00787-023-02300-x">global conflicts and climate change</a>, <a href="https://doi.org/10.1016/j.childyouth.2020.105772">parental unemployment</a>, and <a href="https://doi.org/10.1002/hec.3885">economic prospects</a>. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/climate-change-is-harming-childrens-mental-health-and-this-is-just-the-start-168070">Climate change is harming children’s mental health – and this is just the start</a>
</strong>
</em>
</p>
<hr>
<p>Compared to the body of research on mental health among <em>adult</em> athletes, there is limited research exploring this issue among elite <em>youth</em> athletes. Currently, we do not have adequate data to reliably report on the prevalence of mental health disorders among elite youth athletes. </p>
<p>One exception is the topic of eating disorders, with a <a href="https://doi.org/10.1016/j.jsampl.2023.100040">recent review</a> suggesting that elite youth athletes may be at increased risk compared to non-elite youth athletes, and compared to young people more broadly. </p>
<p>Considering the unique challenges faced by adolescents in elite sport, <a href="http://dx.doi.org/10.1136/bjsports-2022-106352">there is a pressing need to support the mental health of elite youth athletes</a>.</p>
<h2>Closing the gap: Supporting elite youth athletes</h2>
<figure class="align-center ">
<img alt="A skiier in mid-air" src="https://images.theconversation.com/files/569464/original/file-20240116-25-25lkrf.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/569464/original/file-20240116-25-25lkrf.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=480&fit=crop&dpr=1 600w, https://images.theconversation.com/files/569464/original/file-20240116-25-25lkrf.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=480&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/569464/original/file-20240116-25-25lkrf.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=480&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/569464/original/file-20240116-25-25lkrf.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=603&fit=crop&dpr=1 754w, https://images.theconversation.com/files/569464/original/file-20240116-25-25lkrf.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=603&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/569464/original/file-20240116-25-25lkrf.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=603&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Some pressures that are unique to elite youth athletes include early specialization and over-training, having critical or demanding coaches and parents, poor sleep, and trying to balance educational and social needs with increasingly professionalized sporting demands.</span>
<span class="attribution"><span class="source">(Unsplash/Sebastian Staines)</span></span>
</figcaption>
</figure>
<p>A key focus for supporting the mental health of elite youth athletes involves creating youth sport contexts that are protective for mental health. Elite youth sports environments need to be <a href="https://doi.org/10.1007/s40279-023-01912-2">psychologically safe</a> and <a href="https://doi.org/10.3390/socsci9050068">free from abuse and harassment</a>. </p>
<p>A large responsibility sits with parents and coaches, who must avoid overly critical or demanding behaviours and instead engage with young people in supportive ways. Sport organizations should <a href="https://doi.org/10.3389/fpsyg.2022.780359">prioritize well-being and healthy development</a> among youth athletes.</p>
<p><a href="https://doi.org/10.1038/s41380-023-02202-z">Early detection</a> is important to help elite youth athletes get the support they need. Warning signs of mental health concerns can include changes in an athlete’s emotions, mood, behaviours, sleep and appetite. <a href="https://doi.org/10.1016/j.psychsport.2017.11.008">Coaches and parents</a> play important roles in noticing changes in athletes’ mental health, and they can help by opening up conversations about mental health among youth athletes. </p>
<p>Listening without judgment, asking athletes what they think they might need, and offering to help them find places to seek support <a href="https://cmha.ca/brochure/talking-to-teens-about-mental-health/">are all helpful strategies when talking about mental health concerns</a>.</p>
<p>Elite youth athletes and their parents may benefit by seeking support from a psychologist, psychotherapist or psychiatrist who specializes in working with athletes. </p>
<p><a href="https://doi.org/10.1111/jcpp.13889">Much more work is needed</a> to understand the nature of mental health concerns among elite youth athletes. Given the unique demands and pressures of competing in elite sport environments and the challenges that youth face, it is imperative that we pay attention to the mental health needs of these young performers.</p>
<h2>Need support?</h2>
<p><a href="https://cmha.ca/find-help/">Canadian Mental Health Association </a></p>
<p><a href="https://www.ccmhs-ccsms.ca/mental-health-services/referrals">Canadian Center for Mental Health in Sport</a> </p>
<p><a href="https://www.canada.ca/en/public-health/services/mental-health-services/mental-health-get-help.html">Canada Mental Health Support and Resources</a></p><img src="https://counter.theconversation.com/content/217040/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Katherine Tamminen is an Associate Professor at the University of Toronto and a Registered Psychotherapist. Her research is supported by the Social Sciences and Humanities Research Council of Canada and Sport Canada, the Tanenbaum Institute for Science in Sport, and the Canadian Foundation for Innovation and the Ontario Research Fund.</span></em></p><p class="fine-print"><em><span>Courtney Walton receives funding through an MSPS Academic Fellowship at the University of Melbourne. He has advised a number of elite sports codes and organisations nationally.</span></em></p><p class="fine-print"><em><span>Jordan Sutcliffe is an Assistant Professor at the Royal Military College of Canada. Some of his past research has been supported by the Social Sciences and Humanities Research Council of Canada, and he is currently involved on a project funded by the Tannenbuam Institute for Science in Sport.</span></em></p>Given the unique demands and pressures of competing in elite sport environments, it is imperative that we pay attention to elite youth athletes’ mental health needs.Katherine Tamminen, Associate Professor, Sport Psychology, University of TorontoCourtney C Walton, Academic Fellow & Psychologist, Melbourne School of Psychological Sciences, The University of MelbourneJordan Sutcliffe, Assistant Professor, Military Psychology and Leadership, Royal Military College of CanadaLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2206462024-01-10T00:46:26Z2024-01-10T00:46:26ZAs Australian supermarkets are blamed over food costs, French grocer Carrefour targets Pepsi for ‘unacceptable’ price rises<figure><img src="https://images.theconversation.com/files/568517/original/file-20240109-22-jcbhlh.jpg?ixlib=rb-1.1.0&rect=89%2C116%2C4495%2C3327&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/bucharest-romania-0501-shopping-carts-belonging-1983538025">Cristi Croitoru/Shutterstock</a></span></figcaption></figure><p>French supermarket Carrefour has fired a warning shot in a price war with global food brands, dropping PepsiCo products last week because of “<a href="https://www.washingtonpost.com/business/2024/01/04/pepsi-lays-carrefour-grocery/">unacceptably high</a>” increases. </p>
<p>This has seen Pepsi soft drinks removed from stores across Europe, as have Doritos, Quaker breakfast cereals and other food produced by the multinational.</p>
<p>It is usually the job of shoppers and consumer advocates to call out corporations for overstepping the mark on pricing, often targeting retailers. But this time, in a pre-emptive strike against the source of the increases, Carrefour pushed back, showing they were not the problem.</p>
<p>This is a radical departure from the usual policy of retailers passing on costs directly to consumers.</p>
<p><div data-react-class="Tweet" data-react-props="{"tweetId":"1743082147081040226"}"></div></p>
<p>Refusing to carry producers’ brands – known as delisting products – can be risky for retailers, prompting customers to move to competitors who stock their favourite goods.</p>
<p>In Australia, <a href="https://www.huntexportadvice.com/post/australia-market-overview-2021#:%7E:text=Market%20Share,-The%204%20main&text=The%20Woolworths%20Group%20is%20the,10%25%20and%20Metcash%207%25.">65% of the grocery retail sector</a> is controlled by Woolworths (37%) and Coles (28%), raising concerns about market dominance and a lack of real competition.</p>
<p>Strict rules set by the <a href="https://www.accc.gov.au/business/industry-codes/food-and-grocery-code-of-conduct/obligations-and-protections-under-the-food-and-grocery-code#toc-delisting-products">Australian Competition & Consumer Commission</a> (ACCC) govern the requirements for delisting to ensure there is no abuse of market power. </p>
<h2>Market share vs brand value</h2>
<p>In <a href="https://cmaconsulting.com.au/power-in-negotiation-taking-control-of-how-the-cookie-crumbles/">2015</a> biscuit and snack food producer Arnott’s raised prices on 54 products by 10% and Coles refused to carry them.</p>
<p>This decision to stand up to the multinational (contradicting the stereotype it took advantage of its market dominance) was welcomed by many consumers.</p>
<p>However, some were not willing to go without their Tim Tams and Coles ultimately agreed to let Arnott’s raise the prices of 44 products.</p>
<p>Woolworths had a similar issue with Arnott’s in <a href="https://www.afr.com/companies/retail/arnott-s-in-stand-off-with-woolies-20190926-p52v61">2019</a> over prices and promotions, refusing to pass through an increase due to drought and currency fluctuations.</p>
<p>The opposite, however, happened earlier in the same year, when <a href="https://www.heraldsun.com.au/news/victoria/supply-issue-blocking-uncle-tobys-products-getting-to-woolworths/news-story/596260691208f93d2724726a05dc0c5e">Uncle Toby’s </a>withheld inventory from Woolworths because they did not agree to pass on price hikes.</p>
<h2>Runaway prices</h2>
<p>Carrefour’s dispute with PepsiCo should be viewed in the context of the cost of food in Europe blowing out over the past two years, with <a href="https://think.ing.com/articles/food-inflation-is-cooling-down-after-a-hot-summer/#:%7E:text=A%20typical%20EU%20consumer%20currently,by%20'only'%2019%25.">average prices up 30% since 2021</a>.</p>
<p>These increases have prompted retailers to be more transparent with consumers about how their profits compare to those of producers. </p>
<p>Revealing the cause of the price increases, and refusing to pass them on, distances the retailers’ business model from the producers’ opportunistic attempts to increase profits.</p>
<h2>Price gouging or legitimate cost increases?</h2>
<p>This week, Treasurer <a href="https://www.smh.com.au/politics/federal/cost-of-living-relief-on-chalmers-to-do-list-20240108-p5evun.html">Jim Chalmers</a> echoed calls from the Coalition to investigate supermarket pricing and review the ACCC’s grocery <a href="https://www.accc.gov.au/business/industry-codes/food-and-grocery-code-of-conduct">code</a> to ensure savings are passed on as costs abate.</p>
<p><a href="https://www.afr.com/policy/economy/chalmers-threatens-to-punish-supermarket-price-gouging-20240108-p5evuh">Data from the ABS</a> shows wholesale food costs only rose 0.7% in the most recent quarter, while the price for a typical basket of consumer food items rose 3.2%.</p>
<p>This gap also appears in Europe, where the percentage of “unexplained” rises in food prices increased from <a href="https://www.allianz.com/en/press/news/studies/230503_Allianz-High-food-prices-Great-interest-in-Allianz-research-study.html">3% to 10% from 2022 to 2023</a>.</p>
<p>Bigger production costs did not account for all of the increases, leading to the conclusion producers were taking advantage of consumers, blaming the war in Ukraine, increased transport costs and global supply chain disruption to rationalise higher prices on the shelf. </p>
<p>In a 2023 report into European food inflation, Allianz said this was “<a href="https://www.allianz.com/content/dam/onemarketing/azcom/Allianz_com/economic-research/publications/specials/en/2023/april/food-inflation/2023_04_14_europe_food_inflation.pdf">catch-up profit-taking</a>” to recover losses from previous years. </p>
<h2>The rise of shrinkflation</h2>
<p>So-called “shrinkflation” – where the price of goods doesn’t change but they are sold in smaller quantities for the same price – has also made consumers groups sceptical.</p>
<p>In Australia, it is factored into the calculation of inflation for household goods and services as measured by the Consumer Price Index. The ABS characterises shrinkflation as a “<a href="https://www.abs.gov.au/articles/quality-change-australian-cpi">quality decrease</a>”.</p>
<p>Consumer advocacy group CHOICE has noted shrinkflation in Australia since 2016 in its <a href="https://choice.community/t/the-groceries-shrinking-and-getting-more-expensive/27465/14">Community Forum</a>, citing size reductions in products ranging from chocolate bars to breakfast cereals.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/amid-allegations-of-price-gouging-its-time-for-big-supermarkets-to-come-clean-on-how-they-price-their-products-219316">Amid allegations of price gouging, it's time for big supermarkets to come clean on how they price their products</a>
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<p>In Europe, Carrefour instituted a bold in-store campaign last year of naming and shaming brands that downsized products using <a href="https://www.bbc.com/news/business-66809188">signage that highlights the shrinkage.</a> </p>
<p>This allows consumers to make informed decisions without limiting their buying options. But it also risks backlash from producers over how their goods are displayed on the shelf.</p>
<p>Without regulation, or a similar campaign from retailers, Australian consumers must check unit prices to ensure they are not paying more for less.</p>
<h2>A chance to generate goodwill</h2>
<p>Carrefour’s stand against a global brand and decision to delist their products recognises consumers everywhere are feeling the impact of higher prices.</p>
<p>At a time when the <a href="https://www.aph.gov.au/Parliamentary_Business/Committees/Senate/Supermarket_Prices/SupermarketPrices">Senate</a> is investigating claims of price gouging by Australia’s largest supermarket chains, more transparency would be a welcome change.</p>
<p>From negotiations at the farm gate to the multinational boardroom, there is an opportunity for the big grocery retailers to pass on savings where possible, and increase brand loyalty.</p>
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Read more:
<a href="https://theconversation.com/the-cost-of-living-is-biting-heres-how-to-spend-less-on-meat-and-dairy-206703">The cost of living is biting. Here’s how to spend less on meat and dairy</a>
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<p class="fine-print"><em><span>Garritt C. Van Dyk does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Pressure for greater transparency by food producers and retailers about costs is increasing as rising grocery prices hit the hip pocket.Garritt C. Van Dyk, Lecturer, University of NewcastleLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2200202023-12-20T21:01:09Z2023-12-20T21:01:09ZCanada’s competition laws just changed: Here’s what you need to know<iframe style="width: 100%; height: 100px; border: none; position: relative; z-index: 1;" allowtransparency="" allow="clipboard-read; clipboard-write" src="https://narrations.ad-auris.com/widget/the-conversation-canada/canadas-competition-laws-just-changed-heres-what-you-need-to-know" width="100%" height="400"></iframe>
<p>The state of competition — or lack of it — has been on Canadians’ minds for a while. From the <a href="https://globalnews.ca/news/9597898/rogers-shaw-merger-closes-new-telecom-giant/">Rogers-Shaw merger</a> to the <a href="https://theconversation.com/increasing-monopoly-power-poses-a-threat-to-canadas-post-pandemic-economic-recovery-209308">concentrated grocery sector</a> and <a href="https://www.cbc.ca/news/business/canada-bread-price-fixing-1.6883783">record fines for bread price-fixing</a>, just about everyone agrees it’s time to improve our competition law.</p>
<p>The wait is over. Eighteen months after <a href="https://www.canada.ca/en/competition-bureau/news/2022/06/important-amendments-to-the-competition-act-come-into-effect.html">an initial set of reforms was completed in June 2022</a>, and six months after <a href="https://ised-isde.canada.ca/site/strategic-policy-sector/en/marketplace-framework-policy/competition-policy/consultation-future-competition-policy-canada">public consultation on the future of competition law</a>, the second phase of reform is coming. </p>
<p>Most of this overhaul has been folded into the next budget bill, <a href="https://www.parl.ca/LegisInfo/en/bill/44-1/c-59">Bill C-59</a>, but a set of changes to competition law were just passed as the second part of Bill C-56, the <a href="https://www.parl.ca/LegisInfo/en/bill/44-1/c-56">Affordable Housing and Groceries Act</a>. </p>
<p>The title may give people the wrong idea; Bill C-56 won’t directly lower grocery bills. As Commissioner of Competition <a href="https://sencanada.ca/en/Committees/NFFN/NoticeOfMeeting/625484/44-1">Matthew Boswell said to the Senate committee</a>, the reform aims to make the economy more competitive. While competitive markets should lead to lower prices, it’s neither automatic nor immediate. Still, <a href="https://www.ourcommons.ca/DocumentViewer/en/44-1/FINA/report-13">Bill C-56 makes six big changes</a>.</p>
<h2>Market study power</h2>
<p>Market studies are an important way for the <a href="https://ised-isde.canada.ca/site/competition-bureau-canada/en">Competition Bureau</a> — Canada’s competition watchdog — to learn about an industry or sector outside of a specific case investigation. </p>
<p>Previously, when the bureau did these studies, it couldn’t force businesses to provide the information it needed. This was a constant irritant, as we saw in the <a href="https://ised-isde.canada.ca/site/competition-bureau-canada/en/retail-grocery-market-study">Retail Grocery Market Study</a>. Relying on voluntary co-operation <a href="https://globalnews.ca/news/9796699/competition-bureau-canada-grocery-study-takeaways/">prevented the bureau from getting access to all the information it needed for its analysis</a>. </p>
<p>Bill C-56 has changed this by creating specific rules to govern the market study process. If it’s in the public interest, a market study can either be started by the commissioner or the Minister of Industry can ask the commissioner to do one. In either case, the two have to agree it makes sense and is feasible. The need to consult is supposed to guard against unreasonable use of the power by either party. </p>
<p>The study terms are also announced on a public website so interested parties can comment on them before they are finalized. If the bureau respects these conditions, it can apply for a court order to get information for its study from businesses <a href="https://laws.justice.gc.ca/eng/acts/C-34/page-2.html#docCont">under s. 11 of the act</a>, which is the same process used for investigations. Finally, studies have to be completed in 18 months and a report published on a public website.</p>
<h2>Repealing the efficiencies defence</h2>
<p>The second big change that Bill C-56 has made is repealing s. 96, which sets out the <a href="https://ised-isde.canada.ca/site/competition-bureau-canada/en/how-we-foster-competition/education-and-outreach/publications/merger-enforcement-guidelines#s12_0">efficiencies exception to merger law</a>.</p>
<p>Dating back to 1986, this exception allowed things like cost savings and economies of scale to be weighed against the anti-competitive effects of a merger, like price increases, reduced choice or less innovation. </p>
<p>The basic idea was that mergers that produce more savings than anti-competitive effects were deemed beneficial, even if it meant consumers faced higher prices. This differed from that of the United States and other countries <a href="https://one.oecd.org/document/DAF/COMP(2023)4/en/pdf">with consumer-focused approaches</a>. </p>
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<a href="https://theconversation.com/supreme-court-ruling-makes-need-for-competition-act-reform-urgent-89985">Supreme Court ruling makes need for Competition Act reform urgent</a>
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<p>Under Bill C-56, efficiencies will not longer be analyzed as a separate second step in merger analysis that gives it special status over other factors. Since nothing about efficiencies has been added to s. 93, their inclusion in merger analysis will rely on the clause that allows “any other relevant factor” to be considered. This leaves open how and when efficiencies could be qualified as pro-competitive. </p>
<p>This change applies to new mergers, not those already underway.</p>
<h2>Agreements between non-competitors</h2>
<p>Bill C-56 expanded the application of s. 90.1, the civil collaboration provision, to include agreements between parties who are not competitors. Previously, for s. 90.1 to apply, at least two of the parties had to be competitors. This change won’t come into effect until Dec. 15, 2024.</p>
<p>This adjustment was prompted by concerns that restrictive covenants — contract clauses that limit business activities — did not fit well into existing competition law, even where they negatively affected competition.</p>
<p>However, some argue <a href="https://www.ourcommons.ca/Content/Committee/441/FINA/Brief/BR12746179/br-external/CanadianBarAssociation-e.pdf">the change is too broad and could encompass a lot of agreements</a>. Additionally, provinces are best suited to creating rules to prohibit businesses from using contracts for anti-competitive purposes, since contract law is mostly a provincial matter. </p>
<h2>Charging excessive and unfair prices</h2>
<p>Charging excessive or unfair prices has been added to the list of anti-competitive acts under the abuse of dominance rules. While some might think this gives the bureau or affected consumers a way to go after businesses that charge unreasonably high prices, it’s not a consumer protection measure. </p>
<p>Charging excessive and unfair prices only qualifies as an anti-competitive act if there’s evidence it has a predatory, exclusionary or disciplinary effect on a competitor or if it substantially harmed competition. </p>
<p>Based on existing law, it’s not clear what the specific reference to excessive or unfair pricing will add to enforcement. But many rules on abuse of a dominant position have been changed, with more to come in Bill C-59, making it hard to predict how courts might interpret this provision. </p>
<h2>Changing how abuse of dominance is proved</h2>
<p>One of the most significant changes in Bill C-56 is the revamping of the conditions required to prove abuse of dominance.</p>
<p>The <a href="https://ised-isde.canada.ca/site/strategic-policy-sector/en/marketplace-framework-policy/competition-policy/future-competition-policy-canada#V">guide to the public consultation </a> highlighted what critics have said: the abuse of dominant position rules in the Competition Act are needlessly technical and impose a heavy burden on the commissioner, with few successful cases.</p>
<p>Bill C-56 makes several changes to the existing rules, all stemming from a revised test for getting relief from a firm that abuses its dominance. </p>
<p>Previously, proving abuse of dominance involved proving three things: a firm’s dominance in a line of business, engagement in an anti-competitive act and that these actions negatively affected competition. Post-Bill C-56 it’s enough to show a firm is dominant and either the anti-competitive act or an anti-competitive effect.</p>
<p>Will this change allow more cases to be brought where dominant firms abuse their position? Business groups <a href="https://www.ourcommons.ca/Content/Committee/441/FINA/Brief/BR12802642/br-external/CDHoweInstitute-e.pdf">worry this change will create uncertainty, chilling innovation and business investment</a>.</p>
<p>The actual impact will depend on enforcement practices, but this could change once Bill C-59 makes it easier for private parties, like affected businesses or consumer groups, to initiate cases when the commissioner decides not to.</p>
<h2>Substantial increases to monetary penalties</h2>
<p>The final change brought about by C-56 is significant increases to the maximum administrative monetary penalty that can be imposed on dominant firms that harm competition.</p>
<p>The penalties have more than doubled, going from $10 million to $25 million for a first order and $15 million to $35 million for subsequent orders. These increases mean penalties can be better scaled to the size of dominant firms.</p>
<p>While Bill C-56 won’t immediately make groceries more affordable for Canadians, it does bring big changes to competition law. And there will be much more to come with Bill C-59.</p><img src="https://counter.theconversation.com/content/220020/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Jennifer Quaid holds research grants from the Social Sciences and Humanities Research Council of Canada. She is a Senior Fellow at the Centre for International Governance Innovation. She is also a member of Transparency International Canada and the chair of its Legal Committee.</span></em></p>A small set of changes to competition law were just passed as the second part of Bill C-56, the Affordable Housing and Groceries Act.Jennifer Quaid, Associate Professor & Vice-Dean Research, Civil Law Section, Faculty of Law, L’Université d’Ottawa/University of OttawaLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2166412023-11-06T03:58:58Z2023-11-06T03:58:58ZDo racehorses even know they’re ‘racing’ each other? It’s unlikely<p>When racing season arrives, everyone becomes an expert on the horses that are the stars of the spectacle. </p>
<p>TV personalities, professional pundits and form guides talk confidently about the favourite’s “<a href="https://www.racenet.com.au/news/tony-brassel-on-the-great-unmeasurable-ticker">will to win</a>”. In close races, the equine contestants “<a href="https://www.justhorseracing.com.au/news/australian-racing/war-machine-to-battle-it-out/120326">battle it out</a>”, demonstrating “heart”, “grit” and “determination”. </p>
<p>But do horses even know they are in a race, let alone have a desire to win it? Do they understand what it means when their nose is the first one to pass the post?</p>
<p>Based on decades of experience and everything we know about horse behaviour, I think the most plausible answer is “no”. </p>
<h2>From the horse’s perspective</h2>
<p>From a horse’s perspective, there are few intrinsic rewards for winning a race. </p>
<p>Reaching the end might mean relief from the pressure to keep galloping at high speed and hits from the jockey’s whip, but the same is true for all the horses once they pass the finishing post. If the race is close, the horse that eventually wins might even be <a href="https://journals.plos.org/plosone/article?id=10.1371/journal.pone.0015622">whipped more often</a> in the final stages than horses further back in the field.</p>
<p>So while being first to reach the winning post can be crucially important to the horse’s human connections, there is very little direct, intrinsic benefit to the horse that would motivate it to voluntarily gallop faster to achieve this outcome.</p>
<p>So does a horse even know it’s in a race? Again, the answer is likely “no”. </p>
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<a href="https://theconversation.com/10-things-we-do-that-puzzle-and-scare-horses-143675">10 things we do that puzzle and scare horses</a>
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<p>Running (cantering or galloping) is a quintessential horse behaviour and horses voluntarily run together in groups when given the opportunity – even in races <a href="https://www.thenationalnews.com/world/2022/08/22/riderless-race-horses-take-to-the-streets-in-central-italy-in-pictures/">without jockeys</a>. However, there are a number of reasons to think horses have not evolved a desire to “win” during a group gallop.</p>
<p>Horses are social animals. In the wild, to minimise their individual exposure to predators, they <a href="https://journals.plos.org/plosone/article?id=10.1371/journal.pone.0258944">synchronise their movement</a> with other horses in their group.</p>
<p>This synchronisation includes maintaining similar speeds to other group members (to keep the group together), being alert to the positions of their own body and their neighbours’ to avoid collisions, and adapting their speed to the terrain and environmental cues that indicate upcoming danger or obstacles. In the wild, “winning” – that is, arriving first, long before other group members – could even be a negative, exposing the “winner” to an increased risk of predation. </p>
<p>This collective behaviour is the opposite of what owners, trainers and punters want from horses during a race. </p>
<h2>The horse’s preferences (and how riders override them)</h2>
<p>Horse races depend on two horse-related factors: the horse’s innate tendency to synchronise with other horses, and its ability to be trained to ignore these tendencies in response to cues from the jockey during a race. </p>
<p>Trainers and jockeys also harness the preferences of individual horses. Some horses are averse to bunching up with others during the race, so jockeys let them move to the front of the field (these are “<a href="https://www.racingnsw.com.au/news/feature-articles/the-art-of-the-front-runner-timing-a-jockeys-best-friend/">front runners</a>”). Other horses seek the security of the group, so jockeys let them remain in the bunch until closer to the winning post (these are “come-from-behind” winners). </p>
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Read more:
<a href="https://theconversation.com/the-horseracing-industry-is-ignoring-what-science-says-about-whipping-188943">The horseracing industry is ignoring what science says about whipping</a>
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<p>Jockeys use several different interventions to override the horse’s innate tendency to synchronise. These might include: </p>
<ul>
<li><p>directing the horses to travel much closer to the other horses (risking the sometimes fatal injuries we sometimes see at the track)</p></li>
<li><p>travelling at speeds not of the horse’s choosing (usually at far higher speeds and for longer durations, and often maintained by use of the whip) </p></li>
<li><p>preventing the horse from changing course to adapt its position relative to other horses in the field (directing its path via pressure on the mouth from the bit or taps from the whip). </p></li>
</ul>
<p>During the early stages of a race, jockeys rely on horses’ innate desire to remain with the group to ensure they maintain the physical effort required to keep in touch with the front runners. This tendency may then be overruled so the horse will act independently of the group, leave it behind and come to the front to hopefully win. </p>
<h2>No concept of being in a race</h2>
<p>So horses most likely have no concept of being in a “race”, where the goal of their galloping is to get to a certain location on the track before any of the other horses. However, they undoubtedly know what it’s like to <em>be</em> in a race. That is, they learn through prior experience and training what is likely to happen and what to do during a race. </p>
<p>And with jockeys and trainers who understand the individual preferences of their horses to maximise their chances during the race, there will always be one horse that reaches that part of the track designated the winning post before the other horses in the group. </p>
<p>But as for winning horses understanding they are there to “win”? It’s far more likely it is the combination of natural ability, physical fitness and jockey skill that accounts for which horse wins, rather than any innate desire by that horse to get to the winning post before the other horses.</p><img src="https://counter.theconversation.com/content/216641/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Cathrynne Henshall receives post-doctoral research funding from the Hong Kong Jockey Club Welfare Foundation</span></em></p>Horses naturally synchronise their running in groups – but ‘racing’ and ‘winning’ are human concepts.Cathrynne Henshall, Lecturer, School of Agricultural, Environmental and Veterinary Sciences, Charles Sturt UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2139122023-09-20T14:57:06Z2023-09-20T14:57:06ZThe EU’s anti-subsidy investigation into electric vehicles is a risky strategy that may backfire<p>In her <a href="https://state-of-the-union.ec.europa.eu/index_en">State of the Union address</a> on 13 September, European Commission president Ursula von der Leyen announced a new anti-subsidy investigation into electric vehicles (EVs) from China, claiming that the market is being flooded by cheap imports at prices that are kept artificially low by “huge state subsidies”. The move was widely reported to be a reaction to pressure from <a href="https://www.politico.eu/article/france-breton-eu-chief-hit-back-against-chinese-electric-vehicles/">France</a>; other member states, notably Germany, were opposed. </p>
<p>The commission will now undertake the investigation and probably propose new “anti-subsidy” duties on Chinese imports. Although China is the key external supplies of EVs to the European Union, 60% of trade (by value) is within the EU (see graph). Chinese EVs are reported to <a href="https://www.ft.com/content/55ec498d-0959-41ef-8ab9-af06cc45f8e7">only make up 8%</a> of EV sales and less than 3% of total EU car sales. However, there are concerns that low prices will enable them to rapidly increase these figures.</p>
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<span class="attribution"><span class="source">International Trade Centre</span>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span>
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<p>The EU is under pressure to react to competition from China’s state-sponsored capitalist model, but it needs to balance the different interests of its member states, as well as wider needs related to the energy transition. The choice to go after EVs is an indication that the commission is taking a harder line with China, but this will not be an easy ride. Europe wants to <a href="https://ec.europa.eu/commission/presscorner/detail/en/speech_23_2063">“de-risk”</a> its bilateral economic relations, by reducing its reliance on Chinese inputs in critical sectors, but it’s far from achieving this objective and mutual dependencies are extensive.</p>
<h2>Concerns over Chinese retaliation</h2>
<p>A <a href="https://www.ft.com/content/877f2ff6-73f3-493d-9bb1-61ac54afd030">key concern</a> is Chinese retaliation. This long been common in <a href="https://www.jstor.org/stable/20111858">trade defence cases</a>, where targeted countries launch parallel investigations into key imports from the instigating country to pressure them to reduce or remove duties. <a href="https://www.politico.eu/article/france-breton-eu-chief-hit-back-against-chinese-electric-vehicles/">Germany</a> is particularly exposed to such retaliation, given the importance of the Chinese market for their exports, in particular cars.</p>
<p>Retaliation can also hit completely unrelated products. During the highly political anti-dumping investigation into <a href="https://link.springer.com/article/10.1007/s10551-015-2897-5">solar panels</a> a decade ago, China initiated parallel investigations not only into EU exports of polysilicon (an input to solar panels), but also wine, and it threatened an investigation into cars.</p>
<p>The other risks linked to this move have been less widely discussed. China could not only hit EU exports to China, but also by banning or restricting Chinese exports to Europe. The use of export restriction has increased markedly in recent years, both during the <a href="https://www.emerald.com/insight/content/doi/10.1108/cpoib-05-2020-0041/full/html">Covid-19 pandemic</a> and <a href="https://www.hinrichfoundation.com/research/wp/sustainable/costs-of-export-restrictions/">more widely</a>. China has used the tool extensively to restrict exports of rare earths and other key raw materials. Given the importance of such products for the energy transition, any increase in trade restrictions would certainly have consequences for the EU’s climate objectives.</p>
<p>In addition, the EU is highly dependent on China as a source of EV batteries. Indeed, trade in batteries was almost $20bn last year, while trade in EVs were worth $7.6bn. Although these figures cover several different types of batteries, some were certainly <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3980828">destined for EVs</a>. Should China decide to leverage that dependence, Europe’s EV supply chain would certainly suffer.</p>
<h2>Risks of “tariff-jumping” investment</h2>
<p>The investigation could also impact on Chinese investment in Europe. Trade defence measures can encourage foreign direct investment (FDI) through <a href="https://www.jstor.org/stable/3696010">“tariff-jumping” FDI</a> – Chinese investors would invest to produce in Europe and so avoid anti-subsidy duties. However the EU has become much more active in <a href="https://onlinelibrary.wiley.com/doi/abs/10.1111/1758-5899.13215">screening FDI</a> in recent years, with concerns about security and vulnerabilities sometimes trumping economics. Several Chinese investments <a href="https://merics.org/en/press-release/report-merics-and-rhodium-group-battery-investments-are-now-mainstay-chinese-fdi">were blocked</a> last year. Yet the EU is still encouraging EV investments, where Chinese companies are key to upscaling the EU’s own domestic battery capacity.</p>
<p>The European Court of Auditors recently <a href="https://www.eca.europa.eu/en/publications?ref=SR-2023-15">warned</a> that the EU’s targets for EVs could be jeopardised by a lack of battery production capacity. Although France was a key proponent for the new anti-subsidy investigation, they are also host to a €2bn investment in a gigafactory in Doaui funded by a majority Chinese company – <a href="https://investir.lesechos.fr/actu-des-valeurs/la-vie-des-actions/renault-choisit-le-chinois-envision-pour-son-usine-de-batteries-de-douai-sces-1844796">Envision AESC</a>. This is only one of <a href="https://merics.org/en/press-release/report-merics-and-rhodium-group-battery-investments-are-now-mainstay-chinese-fdi">several mega factories</a> being built in the EU by Chinese investors, including in Hungary and Germany.</p>
<p>Increased trade conflict (and increased investment screening) could jeopardise these investments and with them efforts to create an EU value chain for EV. In addition, investment goes both ways. The majority of EVs imported from China last year <a href="https://www.adamasintel.com/eu-china-ev-spat-more-good-news-for-miners/">were EU brands</a> – like BMW and Dacia – who will now be seeking to avoid the new measures imposed on their goods by their home region. Costs are not the only reason these companies are producing in China. It has important advantages, including in the whole value chain required for battery production.</p>
<p>Although the EU recently agreed on <a href="https://www.consilium.europa.eu/en/press/press-releases/2023/07/10/council-adopts-new-regulation-on-batteries-and-waste-batteries/">new standards</a> that seek to support the domestic battery value chain, including by imposing minimum levels of recycling, upscaling the industry and securing circularity will take time. EU producers are already under pressure as a result of the requirement in the US <a href="https://www.csis.org/analysis/ira-and-ev-tax-credits-can-we-kill-multiple-birds-one-stone">Inflation Reduction Act</a> (IRA) that only EVs assembled in the US from batteries substantially made in the US (or a partner with whom they have a free trade agreement) qualify for state subsidies. <a href="https://www.forbes.com/sites/jenniferdungs/2023/05/23/us-versus-europewho-is-set-to-become-the-leader-in-ev-production/">As a result</a>, several planned EU factories have been shelved or downsized.</p>
<h2>An inescapable partnership</h2>
<p>More widely, as von der Leyen acknowledged in her speech, the EU has no choice but to engage with China to secure progress on many global issues – and climate change is one of them. In a <a href="https://ec.europa.eu/commission/presscorner/detail/en/speech_23_2063">speech</a> in March, where she launched the “de-risking” concept, this was one of the “islands of opportunity” highlighted. Seeking to block the development of an important “green” export will undoubtedly make constructive engagement more difficult.</p>
<p>The new investigation also comes at the same time as the rolling out of the EU’s carbon tariff, the <a href="https://taxation-customs.ec.europa.eu/carbon-border-adjustment-mechanism_en">Carbon Border Adjustment Mechanism</a> (CBAM), which will <a href="https://www.sciencedirect.com/science/article/abs/pii/S0301421522000271">hit Chinese exporters hard</a>. In this context accusations of “green protectionism” from Beijing are likely to increase, undermining hopes of building common approaches to global heating.</p>
<p>Finally, the extent to which such trade defence measures actually protect domestic industry is subject to quite some debate. A key problem is trade diversion, where imports may fall from China, but increase from other similarly low-cost sources, reducing the protection provided to EU industry. I found such effects in my previous work on trade defence measures in <a href="https://www.tandfonline.com/doi/abs/10.1080/09692290.2015.1014927">solar panels</a>, <a href="https://kluwerlawonline.com/journalarticle/Journal+of+World+Trade/43.6/TRAD2009050">footwear and textiles</a>.</p>
<p>Although China is a key source of EVs globally, other producers exist. Some, like <a href="https://www.reuters.com/business/autos-transportation/chinese-automakers-sold-75-evs-southeast-asia-q1-study-2023-07-20/">Thailand</a>, are underpinned by Chinese investment. Turkey is a potential supplier to the EU, and while mainly linked to Western automakers, it still has <a href="https://www.technologyreview.com/2023/04/05/1071006/china-report-how-a-chinese-battery-company-powers-turkeys-home-grown-evs/">important relationships</a> with Chinese battery producers. Although these suppliers are marginal at the moment, if the EU imposes anti-subsidy duties on Chinese exports, imports from such countries could increase in response. Although competition from China may be reduced, the protective effect of the measures would be reduced by such trade shifts.</p>
<p>In a highly interconnected world, the extent to which these new measures, if implemented, will actually support the development of domestic EV production is uncertain, while the negative side effects are wide ranging. The next hurdle will be to get a majority of member states to back the move. Voting on trade defence proposals has long been highly <a href="https://onlinelibrary.wiley.com/doi/abs/10.1111/j.1467-9701.2005.00701.x">politicised</a> with certain members supporting duties and others tending to oppose them. The outcome will be closely watched by all those interested not just in EU-China relations, but also in the EU’s wider green transition agenda. There are no easy answers, but the extensive linkages need to be part of the debate.</p><img src="https://counter.theconversation.com/content/213912/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Louise Curran is involved in an EU Horizon Project - TWINSEEDS - looking at the future of EU Value Chains post Covid. More details here: <a href="http://www.TWINSEEDS.eu">www.TWINSEEDS.eu</a> </span></em></p>From restrictions on EU exports to China and Chinese exports to the EU to freezing key investments, there are many ways in which China could retaliate against the EU’s anti-dumping investigation.Louise Curran, Professor of International Business, TBS EducationLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2130532023-09-15T19:37:08Z2023-09-15T19:37:08ZDespite legal costs awarded to Rogers-Shaw, the competition commissioner’s challenge to the telecom merger was not a waste of taxpayer money<figure><img src="https://images.theconversation.com/files/548400/original/file-20230914-21-zgpl5w.jpg?ixlib=rb-1.1.0&rect=36%2C189%2C4076%2C2507&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The Competition Bureau has been ordered to pay $13 million to Rogers Communications and Shaw Communications by the Competition Tribunal.</span> <span class="attribution"><span class="source">(Shutterstock)</span></span></figcaption></figure><iframe style="width: 100%; height: 100px; border: none; position: relative; z-index: 1;" allowtransparency="" allow="clipboard-read; clipboard-write" src="https://narrations.ad-auris.com/widget/the-conversation-canada/despite-legal-costs-awarded-to-rogers-shaw-the-competition-commissioners-challenge-to-the-telecom-merger-was-not-a-waste-of-taxpayer-money" width="100%" height="400"></iframe>
<p>Months after rejecting the Commissioner of Competition’s application to challenge the merger between Rogers and Shaw Communications, <a href="https://decisions.ct-tc.gc.ca/ct-tc/cdo/en/item/521211/index.do">the Competition Tribunal ordered the commissioner to pay nearly $13 million</a> in costs to Rogers and Shaw.</p>
<p>On Aug. 28, the tribunal ruled that <a href="https://www.cbc.ca/news/business/competition-bureau-pays-rogers-shaw-1.6951656">the commissioner’s approach to block the merger was “unreasonable</a>,” although the Competition Bureau stands by its decision to challenge it.</p>
<p>Since the costs will be covered by the Competition Bureau’s tax-funded budget, <a href="https://www.theglobeandmail.com/business/commentary/article-competition-bureau-needs-to-move-back-to-real-world-after-rogers/">some think the commissioner was wrong to challenge the merger</a>. They argue the tribunal’s decision shows that Commissioner Matthew Boswell’s approach is ineffective and should be abandoned.</p>
<p>However, this interpretation is incorrect. Awarding costs is not an indictment of the losing party. Typically in cases like this, the winner receives some compensation for the expenses they incurred while presenting their case. The losing party is required to make a reasonable contribution to the winning party’s costs, but the amount imposed cannot be excessive or punitive. </p>
<p>The costs merely reflect the reality of litigation. Since winners typically get some of their legal costs covered, it was never a question of whether Rogers and Shaw would be awarded compensation, but how much.</p>
<h2>How costs are calculated</h2>
<p>In competition cases, the <a href="https://decisions.ct-tc.gc.ca/ct-tc/cdo/en/item/521146/index.do">tribunal has the final say on costs</a>. Parties are strongly encouraged <a href="https://decisions.ct-tc.gc.ca/ct-tc/cdo/en/item/521161/index.do">to agree on what the winning party should receive before the outcome of the case is known</a>. </p>
<p>When an agreement cannot be reached, like in the Rogers-Shaw case, the tribunal looks at the claims made by each side and makes a decision <a href="https://laws-lois.justice.gc.ca/eng/regulations/sor-98-106/page-22.html#h-1015878">using the principles and rules applied in the federal courts</a>. </p>
<p>Coming to a final number is not an exact science. Besides which side wins, several factors play into deciding how much is appropriate. </p>
<p>In the Rogers-Shaw case, the tribunal recognized the public interest in the litigation, but noted the commissioner did not prevail on any of the issues. The tribunal also rejected most of the commissioner’s arguments that the cost claims were excessive.</p>
<p>It’s worth noting that this case was expensive for both sides, and their cost claims were relatively similar. Though Rogers-Shaw claimed a higher amount, the commissioner <a href="https://decisions.ct-tc.gc.ca/ct-tc/cdo/en/item/521166/index.do">would have sought $10.9 million</a> had he won the case.</p>
<p>To better understand the tribunal’s decision we need to distinguish between two categories of costs: disbursements and legal fees. Disbursements are specific expenses incurred to prepare a case, like hiring experts, or document management. </p>
<p>If a disbursement is reasonable, necessary and justified, there is less scope to reduce expense amounts. In the Rogers-Shaw case, all but two disbursement claims were accepted as reasonable.</p>
<p>Claims for legal fees are different. Courts have rules and tables — called tariffs — that standardize how to calculate costs while accounting for factors like case type, complexity and, when relevant, how the parties behaved during the case.</p>
<p>Since tariffs have not kept pace with increasing legal costs, it has become more common for amounts to be calculated as a percentage of actual fees. Regardless of the method used, however, the reimbursement is meant to cover only some of the actual legal fees incurred. </p>
<h2>The tribunal’s decision</h2>
<p>In the Rogers-Shaw case, the main issue was the proportion of legal fees the commissioner should pay. Rogers and Shaw argued elevated legal fees — above what would normally be awarded — were justified, given the commissioner’s persistence in challenging the <a href="https://www.thestar.com/business/the-26-billion-rogers-shaw-deal-a-timeline-of-key-events/article_ea5c8358-e6cd-5714-b3ad-178f4e7e491f.html">original deal that proposed Rogers buy all of Shaw</a>, rather than focusing on the updated deal that saw Quebecor’s Videotron buy Freedom Mobile from Rogers. </p>
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<em>
<strong>
Read more:
<a href="https://theconversation.com/rogers-shaw-case-unexpectedly-rewrote-merger-law-but-theres-still-time-to-change-that-197188">Rogers-Shaw case unexpectedly rewrote merger law, but there's still time to change that</a>
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<p>The tribunal agreed this was an appropriate consequence for the commissioner’s refusal to adjust his strategy during the hearing — especially in the face of strong hints from the tribunal to do so — since it increased the costs and time it took to conclude the case.</p>
<p>However, it’s important to put this part of the tribunal’s decision in perspective. Its impact on the $13 million total was very small, since the vast majority (about 94 per cent) of it was for disbursements, not legal fees.</p>
<p>The tribunal also chose to impose the lower of two estimates that Rogers and Shaw proposed. Keen to avoid imposing costs at a level that could deter the commissioner from taking future responsible cases, it imposed an amount using the applicable tariff ($414,720 to Rogers and $416,187 to Shaw) — much lower than the 25 per cent of actual legal costs ($1.9 million for Rogers and $2.4 million for Shaw) that Rogers and Shaw wanted.</p>
<p>More crucially, the tribunal made it clear that even though it believed the commissioner should have adapted its trial strategy after the Freedom part of the deal was announced, it recognized that the strategy was connected to the commissioner’s unsuccessful position on a novel legal point.</p>
<blockquote>
<p>“It was by no means vexatious or irresponsible of him to [continue to pursue the case]. It raised some novel issues, and there was a broad public interest in bringing the case.”</p>
</blockquote>
<p>This judicial acknowledgement refutes the claim that challenging the merger was a mistake and a waste of time and taxpayer money.</p>
<h2>Contested cases are uncertain</h2>
<p>Enforcement agencies like the Competition Bureau have a duty to pursue cases they consider to be well-founded and in the public interest. But it’s unrealistic to expect they will win every time. Fighting uphill battles that require sophisticated arguments, or test new theories, are part of the job. </p>
<p>The bureau can sow the seeds of future successes and point out where reform is needed. One prominent example is the <a href="https://scc-csc.lexum.com/scc-csc/scc-csc/en/item/14603/index.do">2015 Tervita case</a> in which the Supreme Court rejected the commissioner’s interpretation of the efficiencies defence, which allows a merger to proceed if the cost savings outweigh the negative impacts on competition. </p>
<p>The court’s decision <a href="https://ised-isde.canada.ca/site/strategic-policy-sector/en/marketplace-framework-policy/competition-policy/future-competition-policy-canada#IV">became the subject of much debate</a> and the federal government <a href="https://www.pm.gc.ca/en/news/news-releases/2023/09/14/fighting-for-the-middle-class">announced on Sept. 14 they will amend the act</a> to remove the defence.</p>
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<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/supreme-court-ruling-makes-need-for-competition-act-reform-urgent-89985">Supreme Court ruling makes need for Competition Act reform urgent</a>
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<p>Given this context, it’s worrying that the cost order in the Rogers-Shaw case is being portrayed as an indictment of the <a href="https://financialpost.com/feature/matthew-boswell-ballsy-bureaucrat-block-rogers-shaw">vigorous enforcement and outspoken advocacy that has characterized Boswell’s tenure</a>.</p>
<p>This criticism comes at a crucial juncture. A long overdue <a href="https://ised-isde.canada.ca/site/strategic-policy-sector/en/marketplace-framework-policy/competition-policy">modernization of competition law</a>, of which Boswell is a champion, is underway. A recent <a href="https://ised-isde.canada.ca/site/strategic-policy-sector/en/marketplace-framework-policy/competition-policy/making-competition-work-canadians-consultation-future-competition-policy-canada">public consultation</a> shows <a href="https://ised-isde.canada.ca/site/strategic-policy-sector/en/marketplace-framework-policy/competition-policy/submissions-consultation-future-competition-policy-canada">a broad spectrum of individuals and groups are interested in reform</a>. </p>
<p>Since Boswell’s term ends in March 2024, the choice of his successor, who will take on the reins of our competition enforcement agency midway through the reform process, will be consequential. As people assess whether Boswell’s legacy should be continued, it’s important to base it on more than a few misunderstood lines in a judgment.</p><img src="https://counter.theconversation.com/content/213053/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Jennifer Quaid holds research grants from the Social Sciences Research Council of Canada. She is a Senior Fellow at the Centre for International Governance Innovation. She is a member of Transparency International Canada and the Chair of its Legal Committee. </span></em></p>Enforcement agencies like the Competition Bureau have a duty to pursue cases they consider to be well-founded and in the public interest. But it’s unrealistic to expect they will win every time.Jennifer Quaid, Associate Professor & Vice-Dean Research, Civil Law Section, Faculty of Law, L’Université d’Ottawa/University of OttawaLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2106032023-08-10T20:45:21Z2023-08-10T20:45:21ZShow me the money: Canada Bread penalty raises questions about criminal fines<figure><img src="https://images.theconversation.com/files/542015/original/file-20230809-24377-hygohw.JPG?ixlib=rb-1.1.0&rect=26%2C4%2C2968%2C1989&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Canadians first learned about a price-fixing scandal that raised the wholesale price of bread in 2017, when Loblaw and George Weston revealed their part in it. A worker restocks shelves at an Atlantic Superstore grocery in Halifax in January 2022.</span> <span class="attribution"><span class="source">THE CANADIAN PRESS/Kelly Clark</span></span></figcaption></figure><iframe style="width: 100%; height: 100px; border: none; position: relative; z-index: 1;" allowtransparency="" allow="clipboard-read; clipboard-write" src="https://narrations.ad-auris.com/widget/the-conversation-canada/show-me-the-money-canada-bread-penalty-raises-questions-about-criminal-fines" width="100%" height="400"></iframe>
<p><a href="https://globalnews.ca/news/9783925/canada-bread-price-fixing-guilty-fine/">Canada Bread Company agreed to pay a $50 million fine</a> on June 21 after <a href="https://www.canlii.org/en/on/onsc/doc/2023/2023onsc3790/2023onsc3790.html?resultIndex=2">pleading guilty to fixing the price of bread sold in grocery stores</a>. </p>
<p>This fine is the <a href="https://www.canada.ca/en/competition-bureau/news/2023/06/canada-bread-sentenced-to-50-million-fine-after-pleading-guilty-to-fixing-wholesale-bread-prices.html">highest ever imposed for a cartel offence in Canada</a> — more than seven times higher than the previous record. </p>
<p>It is also the second-highest fine imposed on a corporation. Only the <a href="https://www.cbc.ca/news/canada/montreal/snc-lavalin-trading-court-libya-charges-1.5400542">$280 million fine SNC-Lavalin agreed to pay</a> as part of a <a href="https://www.canlii.org/en/qc/qccq/doc/2019/2019qccq18961/2019qccq18961.html?autocompleteStr=SNC-Lavalin%20construction&autocompletePos=4">2019 plea deal</a> settling foreign corruption and fraud charges was larger.</p>
<p>Canada Bread’s plea deal is a <a href="https://www.canada.ca/en/competition-bureau/news/2023/06/canada-bread-sentenced-to-50-million-fine-after-pleading-guilty-to-fixing-wholesale-bread-prices.html">significant development in the ongoing investigation by the Competition Bureau</a> into an alleged conspiracy among major grocers and commercial bakeries to fix the prices of bread. </p>
<p>The plea proves the price-fixing scheme did exist — something that could prompt admissions by others suspected of being part of it. </p>
<p>But despite the eye-popping amount, the fine didn’t receive much applause. Instead, many questioned why the $50 million is going to the government and not to those who overpaid for bread. Others wondered <a href="https://www.cbc.ca/news/business/bread-price-fine-paid-to-federal-government-not-consumers-1.6889573">why the money couldn’t be used for something more productive</a>, like food banks or other anti-poverty measures.</p>
<p>These questions challenge some basic principles of sentencing law in Canada. They are worth examining because they raise legitimate questions about why we do things the way we do, and whether we should consider changing.</p>
<h2>A long time coming</h2>
<figure class="align-right ">
<img alt="A hand holding a $25 Loblaw gift card" src="https://images.theconversation.com/files/542019/original/file-20230809-25-rumbdj.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/542019/original/file-20230809-25-rumbdj.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=406&fit=crop&dpr=1 600w, https://images.theconversation.com/files/542019/original/file-20230809-25-rumbdj.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=406&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/542019/original/file-20230809-25-rumbdj.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=406&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/542019/original/file-20230809-25-rumbdj.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=511&fit=crop&dpr=1 754w, https://images.theconversation.com/files/542019/original/file-20230809-25-rumbdj.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=511&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/542019/original/file-20230809-25-rumbdj.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=511&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Loblaw offered customers $25 gift cards in 2018 to make amends for its part in the bread price-fixing scheme.</span>
<span class="attribution"><span class="source">THE CANADIAN PRESS /Richard Buchan</span></span>
</figcaption>
</figure>
<p>Canadians first learned about the bread-fixing scheme in 2017 <a href="https://www.loblaw.ca/en/george-weston-and-loblaw-take-action-to-address-industry-wide-anti-competitive-activity/">when Loblaw and George Weston revealed</a> their part in it. They claimed the scheme ran from 2001 to 2015 and involved major grocery chains and bakeries. </p>
<p>As the first ones to co-operate with investigators, Loblaw was granted immunity from prosecution under the Competition Bureau’s <a href="https://ised-isde.canada.ca/site/competition-bureau-canada/en/how-we-foster-competition/education-and-outreach/immunity-and-leniency-programs-under-competition-act#sec02">Immunity and Leniency Program</a>. Since cartels are difficult to detect from the outside, immunity is often used to encourage insiders to spill the beans. </p>
<p>Once immunity has been granted, the remaining cartel members are typically motivated to seek leniency by co-operating and pleading guilty in exchange for a reduced penalty. <a href="https://financialpost.com/news/retail-marketing/bread-price-fixing-investigation-is-still-an-open-case-competition-watchdog-says">In this case, however, no one took the bait</a>. </p>
<p>With nothing to back up Loblaw’s claims, the <a href="https://www.cbc.ca/news/business/bread-price-fixing-loblaw-1.6719884">investigation went quiet</a> for six years, until June of this year.</p>
<h2>Why the government, not consumers?</h2>
<p>By default, <a href="https://laws.justice.gc.ca/eng/acts/C-46/page-119.html#h-131365">fines are paid either to the provincial treasurer or the receiver general of Canada</a>, depending on the offence. </p>
<p>Since a fine is a punishment imposed by the state on behalf of citizens, paying fines to general revenues is a simple and fair way of ensuring the funds can benefit everyone without predetermining how the money should be spent. Exceptions are rare and the Canada Bread case did not fit any of them.</p>
<p>While the <a href="https://laws-lois.justice.gc.ca/eng/acts/c-46/page-120.html#h-131542">Criminal Code does allow for restitution in appropriate cases</a>, it’s limited to those that fit the following criteria: it’s easy to determine the dollar amount of harm or loss suffered, the victim can be identified and there is a clear connection between the crime and harm caused.</p>
<p>Restitution isn’t ordered in cartel cases because they don’t meet these benchmarks. </p>
<p>The bread price-fixing cartel illustrates this. Imagine trying to calculate how many consumers overpaid for bread, how much extra they paid for it and how often it happened. Since most people won’t have receipts, the best we can do is a rough estimate. </p>
<p>Trying to use illegal gains as a substitute measure is no better. How do we determine what portion of grocery and bakery profits are linked to overpriced bread?</p>
<p>Given these challenges, aggrieved consumers bring class actions in civil courts that have the expertise to handle complex liability matters. Two class actions are already underway against alleged bread cartel members, <a href="https://www.renvath.com/en/bread-price-fixing-class-action">one in Québec</a> and <a href="https://www.strosbergco.com/class-actions/bread/">one in Ontario</a>.</p>
<p>While class actions can take time, they can increase the chances of a settlement, such as <a href="https://www.cbc.ca/news/canada/montreal/eastern-townships-gas-cartel-settlement-1.4123344">the one reached in 2017</a> on behalf of consumers harmed by the gas price-fixing cartel that operated in eastern Québec in the mid-2000s.</p>
<p>If direct compensation to victims is best left to civil courts, what about using criminal fines to address social problems exacerbated by the crime?</p>
<h2>Can fines be used to fund good works?</h2>
<p>Paying fines to entities other than the government, such as charities, is an example of an alternate measure. They can provide alternatives to traditional fines and imprisonment and can be set up <a href="https://laws-lois.justice.gc.ca/eng/acts/C-46/page-115.html#h-130813">in legislation</a> or be created by courts. </p>
<p>While they tend to be used for specific offender types (youth, those with limited means, and those with mental health or addiction issues) and less serious crimes, alternate measures are also used against corporate offenders in areas like <a href="https://kings-printer.alberta.ca/1266.cfm?page=E12.cfm&leg_type=Acts&isbncln=9780779841660&display=html">environmental protection</a>, <a href="https://laws-lois.justice.gc.ca/eng/acts/f-14/page-12.html#h-1175354">fisheries</a> and <a href="https://kings-printer.alberta.ca/1266.cfm?page=O02P2.cfm&leg_type=Acts&isbncln=9780779843305&display=html">workplace health and safety</a>. </p>
<p>Allowing alternative measures for regulatory offences makes sense because they are designed to promote better compliance and harm prevention. <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3468332">Though not perfect</a>, they are seen as more constructive than simply paying a fine.</p>
<figure class="align-center ">
<img alt="A woman in a hijab and green vest packs food into crates in a warehouse" src="https://images.theconversation.com/files/542022/original/file-20230809-20-c0el9t.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/542022/original/file-20230809-20-c0el9t.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=397&fit=crop&dpr=1 600w, https://images.theconversation.com/files/542022/original/file-20230809-20-c0el9t.JPG?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=397&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/542022/original/file-20230809-20-c0el9t.JPG?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=397&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/542022/original/file-20230809-20-c0el9t.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=499&fit=crop&dpr=1 754w, https://images.theconversation.com/files/542022/original/file-20230809-20-c0el9t.JPG?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=499&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/542022/original/file-20230809-20-c0el9t.JPG?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=499&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">A worker checks expiry dates on bottled and canned products at the Edmonton Food Bank on July 21, 2023. Some people are wondering why the money from Canada Bread’s fine isn’t being used to support food banks or other anti-poverty measures.</span>
<span class="attribution"><span class="source">THE CANADIAN PRESS/Jason Franson.</span></span>
</figcaption>
</figure>
<p>Since many regulatory sanctions are remedial, it wasn’t hard for courts to start ordering that fines be used to fund research studies at universities, create new training programs or develop updated industry-wide standards, instead of being paid to the government.</p>
<p>Making orders like these is easier in places where governments have created dedicated funds to support remediation and prevention efforts, like the federal <a href="https://www.canada.ca/en/environment-climate-change/services/environmental-funding/programs/environmental-damages-fund.html">Environmental Damages Fund</a>.</p>
<p>When it comes to serious economic crimes like cartels, fraud and corruption, however, <a href="https://canlii.ca/t/t987">my research shows</a> that creative sanctions have rarely been used. </p>
<p>But the idea of using fines to fix problems made worse by economic crime is catching on, <a href="https://digitalcommons.schulichlaw.dal.ca/dlj/vol43/iss1/11/">such as a proposal to create an international development fund supported by fines from foreign corruption cases</a>. </p>
<p>Courts, prosecutors and defence counsels are also more open to exploring innovative sanctions. A set of creative settlements crafted in recent years to <a href="https://www.canada.ca/en/competition-bureau/news/2023/03/bpr-to-pay-485000-following-seventh-quebec-bid-rigging-settlement.html">resolve bid-rigging cases</a> is particularly relevant here. </p>
<p>In that case, the penalty took into account what the defendants had paid into the Québec <a href="https://www.legisquebec.gouv.qc.ca/en/document/cr/r-2.2.0.0.3,%20r.%201">Voluntary Reimbursement Fund</a> that was created to recover amounts improperly paid by municipalities because of corruption. </p>
<p>These trends suggest that directing fines into a fund to support consumer issues, food banks or similar measures is possible, should the provinces be willing to set them up.</p><img src="https://counter.theconversation.com/content/210603/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Jennifer Quaid holds research grants from the Social Sciences and Humanities Research Council of Canada. She is the Chair of the Legal Committee of Transparency International Canada and a Senior Fellow at the Centre for International Govervance Innovation.</span></em></p>Why is the $50 million going to the government and not to those who overpaid for bread? The answer is complicated.Jennifer Quaid, Associate Professor & Vice-Dean Research, Civil Law Section, Faculty of Law, L’Université d’Ottawa/University of OttawaLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2093082023-07-16T11:57:05Z2023-07-16T11:57:05ZIncreasing monopoly power poses a threat to Canada’s post-pandemic economic recovery<figure><img src="https://images.theconversation.com/files/537149/original/file-20230712-21301-q8sobd.jpg?ixlib=rb-1.1.0&rect=282%2C0%2C3414%2C1912&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">A recent report from Canada's competition watchdog found that a lack of competition in the grocery sector has led to higher prices for consumers.</span> <span class="attribution"><span class="source">THE CANADIAN PRESS/Graeme Roy</span></span></figcaption></figure><p>Canada is currently grappling with a significant economic issue: <a href="https://dx.doi.org/10.2139/ssrn.3357041">market concentration</a>. A select few corporations dominate key sectors, <a href="https://www.canada.ca/en/competition-bureau/news/2023/05/canadas-competition-moment-is-here-lets-seize-it.html">leading to reduced competition</a>, rising prices and limited purchase options for consumers.</p>
<p>Canada’s grocery industry is a prime example of this. A recent <a href="https://ised-isde.canada.ca/site/competition-bureau-canada/en/how-we-foster-competition/education-and-outreach/canada-needs-more-grocery-competition">report from the Competition Bureau</a> found that a lack of competition in the grocery sector is resulting in higher food prices. </p>
<p>The grocery industry is dominated by five major players — Loblaws, Metro, Empire (the owner of Sobeys), Walmart and Costco. These five companies <a href="https://www.cbc.ca/news/business/competition-bureau-grocery-1.6889712">account for over three-quarters of all food sales</a> in Canada.</p>
<p>The Bureau <a href="https://www.thestar.com/business/2023/06/27/what-the-grocery-report-recommends-to-improve-competition.html">recommended four policies to encourage competition</a> in the sector. These include establishing a grocery innovation strategy, encouraging new independent and international players, introducing legislation for consistent unit pricing and limiting property controls.</p>
<p>While independent grocery chains could be a viable alternative, they don’t occupy as large a presence of the market as they do in other countries. The <a href="https://globalnews.ca/news/9796699/competition-bureau-canada-grocery-study-takeaways">Canadian grocery market is heavily concentrated</a> and limits the ability of independent chains to compete by forcing them to purchase their products from larger chains.</p>
<h2>History of monopolies</h2>
<figure class="align-right ">
<img alt="A brass Hudson's Bay Company logo seen outside one of its stores" src="https://images.theconversation.com/files/537152/original/file-20230712-17-qpvwhi.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/537152/original/file-20230712-17-qpvwhi.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=385&fit=crop&dpr=1 600w, https://images.theconversation.com/files/537152/original/file-20230712-17-qpvwhi.JPG?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=385&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/537152/original/file-20230712-17-qpvwhi.JPG?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=385&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/537152/original/file-20230712-17-qpvwhi.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=484&fit=crop&dpr=1 754w, https://images.theconversation.com/files/537152/original/file-20230712-17-qpvwhi.JPG?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=484&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/537152/original/file-20230712-17-qpvwhi.JPG?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=484&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">The Hudson’s Bay Company was granted a commercial monopoly over the entire Hudson Bay drainage basin, known as Rupert’s Land, in 1670.</span>
<span class="attribution"><span class="source">THE CANADIAN PRESS/Nathan Denette</span></span>
</figcaption>
</figure>
<p>Canada’s economy has historically been marked by notable monopolies, thanks to its vast geographical expanse and relatively sparse population. </p>
<p>Entities like the <a href="https://canadiangeographic.ca/articles/the-untold-story-of-the-hudsons-bay-company/">Hudson’s Bay Company</a> and <a href="https://www.thecanadianencyclopedia.ca/en/article/canadian-pacific-railway">Canadian Pacific Railway company</a> played significant roles in the country’s development. This largely happened out of concern that domestic companies would be overwhelmed by American competitors unless they grew significantly.</p>
<p>Recent trends indicate this phenomenon is not only persisting, but intensifying. While <a href="https://www.cpacanada.ca/en/news/pivot-magazine/canadian-business-monopolies">Sobeys, Loblaws, Metro, Costco and Walmart dominate</a> over 60 per cent of the grocery sector, Bell, Rogers and Telus command about 89 per cent of the wireless telecommunications market.</p>
<p>The concentration of power extends beyond these sectors. <a href="https://globalnews.ca/news/9634933/canada-big-banks-analysis/">The banking industry in Canada is dominated by six banks</a> — the Royal Bank of Canada, TD Bank, Scotiabank, the Bank of Montreal, CIBC and National Bank, which collectively control about 93 per cent of the industry.</p>
<p>Similarly, <a href="https://www.statista.com/statistics/339828/market-share-of-the-canadian-brewing-industry/">the beer market is largely controlled by two multinational giants</a>, Anheuser-Busch InBev and Molson Coors.</p>
<p>And the Canadian telecommunications industry is still reeling from the recent <a href="https://www.reuters.com/markets/deals/canadas-decision-rogers-shaw-deal-may-come-friday-2023-03-31/">merger between two of the industry’s giants</a>, Rogers Communications and Shaw Communications. The implications of this deal are far-reaching.</p>
<h2>The Rogers-Shaw merger</h2>
<p>The Rogers-Shaw merger’s final approval came with <a href="https://www.cbc.ca/news/business/rogers-shaw-approval-1.6797175">21 enforceable conditions</a> Rogers and Videotron must adhere to, aimed at bolstering competition and reducing costs for customers. </p>
<p>The merger’s approval depended on Shaw selling its Freedom Mobile business to Quebecor’s Videotron. If Rogers breaches its conditions, it must pay up to $1 billion in damages. Videotron could be subject to $200 million in penalties if it fails to meet its commitments. </p>
<figure class="align-center ">
<img alt="A man holds up a sheet of paperwork as he speaks into a microphone attached to a podium" src="https://images.theconversation.com/files/537150/original/file-20230712-26-ztwm9r.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/537150/original/file-20230712-26-ztwm9r.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=399&fit=crop&dpr=1 600w, https://images.theconversation.com/files/537150/original/file-20230712-26-ztwm9r.JPG?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=399&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/537150/original/file-20230712-26-ztwm9r.JPG?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=399&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/537150/original/file-20230712-26-ztwm9r.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=502&fit=crop&dpr=1 754w, https://images.theconversation.com/files/537150/original/file-20230712-26-ztwm9r.JPG?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=502&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/537150/original/file-20230712-26-ztwm9r.JPG?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=502&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Innovation, Science and Industry Minister François-Philippe Champagne holds up a contract between the telecoms and the federal government as he speaks at a news conference about the Rogers-Shaw merger on Parliament Hill in Ottawa on March 31, 2023.</span>
<span class="attribution"><span class="source">THE CANADIAN PRESS/ Patrick Doyle</span></span>
</figcaption>
</figure>
<p>Despite these conditions, <a href="https://www.cbc.ca/news/business/rogers-shaw-merger-official-1.6799566">some remain skeptical about the impact of the merger</a> on competition in Canada’s telecommunications sector. </p>
<p><a href="https://globalnews.ca/news/9597898/rogers-shaw-merger-closes-new-telecom-giant/">Some critics have argued</a> the merger may lead to higher prices for consumers and less innovation. Carleton University political economy professor Dwayne Winseck warned it could lead to a “<a href="https://twitter.com/mediamorphis/status/1372207252363489290">tight oligopoly on steroids</a>.”</p>
<p>On the flip side, <a href="https://www.cbc.ca/news/business/rogers-shaw-internet-deal-1.5950727">other experts believe the merger could benefit consumers</a> by accelerating the rollout of 5G networks and improving infrastructure and services, particularly in rural areas.</p>
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<strong>
Read more:
<a href="https://theconversation.com/heres-how-the-rogers-shaw-merger-could-benefit-canadian-customers-201132">Here's how the Rogers-Shaw merger could benefit Canadian customers</a>
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</em>
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<p>However, these benefits could be offset by the potential for higher prices and less competition. The merger could lead to a dominant market share in Ontario, reducing competition and potentially leading to higher internet prices.</p>
<p>This is particularly concerning, given Ontario’s average monthly price of home internet services is <a href="https://www.cannettel.com/blog/rogers-shaw-merger-implications-internet-prices-ontario">already higher than the national average</a>. This situation underscores the need for a revamp of Canada’s competition laws.</p>
<h2>Loopholes in competition law</h2>
<p>The merger has sparked controversy because it exploited weaknesses in Canada’s anti-monopoly law, <a href="https://laws-lois.justice.gc.ca/eng/acts/c-34/fulltext.html">the Competition Act</a>, to push the deal through. </p>
<p>The Competition Act has been <a href="https://www.wealthsimple.com/en-ca/magazine/canada-monopolies">criticized for failing to prevent acquisitions</a> that allow large firms to eliminate competitive threats and solidify their dominance.</p>
<p>As Canada’s competition watchdog, the Competition Bureau can review mergers to determine if they will be harmful to competition. But since its introduction in 1986, <a href="https://www.cigionline.org/publications/merger-policy-for-a-dynamic-and-digital-canadian-economy/">the bureau has only challenged 18 mergers</a> and has never won a challenge on final judgment.</p>
<p>The law also has a high bar for intervention in a merger, <a href="https://globalnews.ca/news/9169363/merger-laws-canada-competition/">often favouring negotiated agreements</a> that include concessions or remedies that address some of the competition concerns, but not necessarily all.</p>
<p>The Competition Commissioner, Matthew Boswell, <a href="https://financialpost.com/feature/matthew-boswell-ballsy-bureaucrat-block-rogers-shaw">believes the existing competition laws are inadequate</a>. Boswell has been hamstrung by legal loopholes and unable to prevent anti-competitive mergers, like the Rogers-Shaw deal, from happening.</p>
<h2>Challenges and opportunities</h2>
<p>Along with rising consumer prices, limited purchase options and intensifying competition, the growth of monopolies in Canada has led to a host of other issues.</p>
<p>Monopolies have <a href="https://policyoptions.irpp.org/magazines/february-2022/competition-hurts-innovation-canada">the potential to stifle innovation</a> — a key driver of economic growth, as a lack of competition tends to dampen innovative efforts. Productivity growth, which is crucial for improving living standards, <a href="https://policyoptions.irpp.org/magazines/april-2023/the-low-productivity-of-canadian-companies-threatens-our-living-standards/">is also under threat</a>, as monopolies can create an environment less conducive to efficiency and progress.</p>
<p>As Canada embarks on its post-pandemic economic recovery, policymakers must ensure economic resilience and inclusiveness while preventing existing monopoly issues from worsening. </p>
<p>At the same time, there is an opportunity to reshape the economic landscape to encourage competition and foster innovation, benefiting everyone involved in the market.</p>
<p>This journey towards a more prosperous future will require rigorous scrutiny of developments like the proposed Rogers-Shaw merger and the wisdom to navigate the interplay of monopolies, competition and the broader economy.</p><img src="https://counter.theconversation.com/content/209308/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Garros Gong does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>As Canada embarks on its post-pandemic economic recovery, policymakers must ensure economic resilience and inclusiveness while preventing existing monopoly issues from worsening.Garros Gong, Ph.D. Student in Management Science, University of WaterlooLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2073272023-06-25T20:04:05Z2023-06-25T20:04:05ZYes, Australian businesses have become less dynamic. But there are bigger reasons for our sliding productivity growth<p>Since 2005, annual labour productivity growth (growth in output per hour worked) has been the best part of one percentage point below its long-term average in Australia and other developed countries.</p>
<p>The <a href="https://www.pc.gov.au/inquiries/completed/productivity/report">Productivity Inquiry</a> that I helped conduct for the Productivity Commission found this will lead to much-slower improvements in Australians’ living standards than in the past.</p>
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<p>In the search for a culprit, economists including Australia’s Competition Minister <a href="https://ministers.treasury.gov.au/ministers/andrew-leigh-2022/speeches/fh-gruen-lecture-australian-national-university-canberra">Andrew Leigh</a> have pointed to reduced business competition resulting in decreasing dynamism, by which they mean:</p>
<ul>
<li>less <a href="https://blogs.worldbank.org/developmenttalk/when-do-firms-call-it-quits">entry and exit</a> of firms </li>
<li>less job-switching</li>
<li>a significant reduction in business investment</li>
<li>mergers leading to increased business concentration</li>
<li>an increase in the markups businesses can sustain</li>
<li>only few highly-productive firms, with the rest increasingly less so</li>
</ul>
<p>A study that I have just published in <a href="https://onlinelibrary.wiley.com/doi/10.1111/1759-3441.12389">Australian Economic Papers</a>, reviews the evidence and finds that while most of these things have happened (and while many are undesirable) they <em>aren’t sufficient</em> to explain what’s happened to productivity. </p>
<p>The findings suggest that even if we did make our economy more competitive and businesses more dynamic (and we probably should) improving productivity growth depends on a much bigger set of policy reforms.</p>
<p>Here’s what we find.</p>
<h2>Firm entry and exit has been slowing</h2>
<p>In Australia, the rates of firm entry and exit (meaning companies either joining or dropping out of an industry) <a href="https://onlinelibrary.wiley.com/doi/10.1111/1759-3441.12389">declined</a> between 2005–06 and 2012–13. </p>
<p>While there’s been an increase in firm entry more recently, it’s been mainly among non-employing business – sole traders and independent contractors – rather than bigger businesses.</p>
<p>In the US (we don’t have an equivalent Australian study) red tape may be strangling dynamism. Investment in new profitable businesses has slowed at the same time as there has been a significant increase in regulation of those businesses. </p>
<p>In Australia, improvements in business survival rates at least partly seem to reflect improved conditions for both survivors and new entrants, rather than barriers that protect unproductive survivors at the expense of more-productive entrants.</p>
<h2>Job-switching has slowed</h2>
<p>Australian job mobility has <a href="https://www.pc.gov.au/inquiries/completed/productivity/report/productivity-volume7-labour-market.pdf">declined dramatically</a> over the past 30 years, in part because the population is ageing, and older workers are less likely to switch jobs than younger workers.</p>
<p>Another explanation might be that Australian businesses face a less volatile environment, suggesting job turnover does not have value in its own right. </p>
<p>While job churn tends to fall if barriers to job mobility rise, it also falls when businesses face fewer shocks, making any link between declining job turnover and diminished competition ambiguous.</p>
<h2>Business investment has slowed</h2>
<p>Non-mining business investment in Australia has stagnated over recent decades, as it has in a number of other advanced economies.</p>
<p>Among the suggested explanations are risk aversion and uncertainty, pessimism about the future and lower productivity growth. The role, played by competition – if any – is far from clear.</p>
<h2>Business concentration has climbed</h2>
<p>The average concentration of Australian businesses (the extent to which industries are dominated by a few big firms) appears to have been falling until the early 2000s, and <a href="https://treasury.gov.au/sites/default/files/2022-10/p2022-325290-productivity-growth.pdf">climbing</a> since then. </p>
<p>Most of the increased concentration appears to have been in already-concentrated industries, with technological advances and exposure to imports explaining a lot of it.</p>
<p>As an example, concentration has increased in “warehousing and storage”, but the industry has taken advantage of <a href="https://www.pc.gov.au/research/supporting/economic-dynamism">technological advances</a> including parcel tracking and smart warehouses, meaning both concentration <em>and</em> competition have increased as firms have scaled up to install new technologies.</p>
<h2>Businesses profit margins have climbed</h2>
<p>Markups (profit margins) appear to have climbed by around 57% in Australia between 1980 to 2016, which is less than in the US, Canada and much of the European Union, but greater than in New Zealand and most Asian countries except for South Korea. </p>
<p>But markups at the level of the firm are difficult to measure because they depend on assumptions about the way the firm makes its products. Different assumptions can produce very different estimates.</p>
<h2>There are only a few highly-productive firms</h2>
<p>Globally and in Australia the most-productive firms seem to be three to four times more productive than the less productive, but, at least in Australia, there is little evidence to suggest the gap is widening. </p>
<p>What evidence there is suggests the gap between the most-productive Australian firms and the most-productive global firms is <a href="https://read.oecd-ilibrary.org/economics/the-best-versus-the-rest_63629cc9-en#page1">widening</a>, suggesting <em>all</em> Australian firms are slower to adopt leading technologies than they were.</p>
<p>Put bluntly, Australian businesses as a whole appear to have become slow to adopt world best practice; which is a problem, but not necessarily a problem of highly-productive firms versus the rest.</p>
<p>There are a <a href="https://www.pc.gov.au/inquiries/completed/productivity/report/productivity-volume5-innovation-diffusion.pdf">range of policies</a> that can help to reverse the decline, but it is far from clear that competition plays much of a role.</p>
<h2>We’re at risk of chasing the wrong target</h2>
<p>The broader reasons for Australia’s declining productivity growth include changing demographics, changing international trade patterns and the changing nature of industries as Australia continues to moves towards a more service-based economy.</p>
<figure class="align-right zoomable">
<a href="https://images.theconversation.com/files/533440/original/file-20230622-17-zjbjcb.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/533440/original/file-20230622-17-zjbjcb.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/533440/original/file-20230622-17-zjbjcb.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=967&fit=crop&dpr=1 600w, https://images.theconversation.com/files/533440/original/file-20230622-17-zjbjcb.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=967&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/533440/original/file-20230622-17-zjbjcb.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=967&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/533440/original/file-20230622-17-zjbjcb.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1215&fit=crop&dpr=1 754w, https://images.theconversation.com/files/533440/original/file-20230622-17-zjbjcb.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1215&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/533440/original/file-20230622-17-zjbjcb.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1215&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="attribution"><a class="source" href="https://www.pc.gov.au/inquiries/completed/productivity/report">Productivity Commission</a></span>
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</figure>
<p>Fixing our productivity problem requires a suite of changes that address these and other issues. In March, the Productivity Commission laid out a <a href="https://www.pc.gov.au/inquiries/completed/productivity/report/productivity-recommendations-reform-directives.pdf">roadmap</a>.</p>
<p>Of course, we shouldn’t ignore competition. The government’s 2015 <a href="https://treasury.gov.au/publication/p2015-cpr-final-report">Competition Policy Review</a> focused on updating competition and consumer laws. </p>
<p>Many of its recommendations remain on the shelf. </p>
<p>Further, new challenges are emerging. To pick one, Australia currently has three alternative ways to get competition clearances when businesses merge.</p>
<p>Unsurprisingly, they pick the path of least resistance. </p>
<p>The head of the Competition and Consumer Commission Gina Cass-Gottlieb has <a href="https://www.accc.gov.au/about-us/media/speeches/the-role-of-the-accc-and-competition-in-a-transitioning-economy-address-to-the-national-press-club-2023">developed a proposal</a> that would help. </p>
<p>Actually boosting productivity will require measures that cover education, technology, business regulation, taxation, carbon emissions, and more. </p>
<p>Blaming declining dynamism and declining competition for declining productivity is not just a diversion, it risks making us do the wrong things.</p><img src="https://counter.theconversation.com/content/207327/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Stephen King is a Commissioner at the Australian Productivity Commission and a former Commissioner with the Australian Competition and Consumer Commission. He was one of the authors of the recent Productivity Commission 5-year Productivity report. The views in this article are his own.</span></em></p>Put bluntly, Australian businesses as a whole appear to have become slow to adopt world best practice. But if we want to lift productivity, we need to act on a wider suite of solutions.Stephen King, Professor, Monash UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2070262023-06-06T03:52:18Z2023-06-06T03:52:18ZDoes competition make us less moral? New research says yes, but only a little bit<figure><img src="https://images.theconversation.com/files/530222/original/file-20230606-18-kaq90.jpg?ixlib=rb-1.1.0&rect=58%2C35%2C3806%2C2553&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Bao Truong / Unsplash</span></span></figcaption></figure><p>Many of our economic and even social interactions are competitive. We use markets to find jobs, but also dates. What does this mean for our morals? Does capitalism give us the American dream, or American Psycho? Does the experience of competition keep us honest, or drive us towards cheating? </p>
<p>These profound questions preoccupied the minds of some of the great classical economists, who saw capitalism as rife with both good and bad moral influences. Adam Smith mostly focused on the good, whereas Karl Marx was admittedly less optimistic.</p>
<p>To test this question convincingly in the lab, our <a href="https://manydesigns.online/#team">project coordinators</a> invited dozens of behavioural scientists to contribute their own experimental designs, resulting in observations of more than 18,000 people in total.</p>
<p>Our results, <a href="https://www.pnas.org/doi/10.1073/pnas.2215572120">published in Proceedings of the National Academy of Sciences</a>, show that competitive interactions tend to make people’s behaviour slightly less moral – and offer some intriguing clues about why this might be so.</p>
<h2>A difficult question to answer</h2>
<p>We are not the first to take a scientific approach to the question of competition and morality. However, individual tests have delivered mixed results, possibly because of differences in the definitions and measures of morality used. </p>
<p>Some of the early results were provocative, such as a <a href="https://www.science.org/doi/10.1126/science.1231566">finding</a> that people in competition were less likely to prevent the death of a mouse. However, these results were <a href="https://direct.mit.edu/rest/article-abstract/105/1/226/97758/Does-Market-Interaction-Erode-Moral-Values">hard to replicate or interpret</a>.</p>
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<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/karl-marx-his-philosophy-explained-164068">Karl Marx: his philosophy explained</a>
</strong>
</em>
</p>
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<p>One way to account for differences in the design of individual studies is to conduct a “meta-analysis”, evaluating and combining the results of many different studies. However, meta-analysis often has troubles of its own, as selective reporting and publication bias can influence which studies are available to be included in the analysis.</p>
<h2>What was different about our study</h2>
<p>To really get some reliable results, we went a step further and carried out a “prospective meta-analysis”. </p>
<p>The “prospective” part means that all the studies to be included in the analysis were registered before they were done. This prevents cherry-picking of results, or bias in what kind of results are published.</p>
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<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/how-cute-dogs-help-us-understand-adam-smiths-invisible-hand-35673">How cute dogs help us understand Adam Smith's 'invisible hand'</a>
</strong>
</em>
</p>
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<p>Our project involved 45 different experiments carried out by teams around the world. Each team independently designed an experiment to test the effects of competition on morality.</p>
<p>The results of these studies, which involved observations of more than 18,123 individual participants, were then collated and analysed.</p>
<h2>A small decline in morality (on average)</h2>
<p>The meta-analysis revealed that competition has an overall negative effect on morality, but the effect is very small. (The effect is measured by a number called Cohen’s <em>d</em>. A value of 0.2 is considered a small effect, and the value we found was only 0.1.)</p>
<p>As expected, we also observed a substantial variation in the effects as measured by different experiments. Some were positive, some were negative, and the sizes of the effects also varied.</p>
<p>So despite the advantages of our new prospective meta-analysis, the jury is still out regarding the overall effect of competition on morality. </p>
<p>Perhaps the question is too general to answer properly without a particular context. The devil may be in the details.</p>
<h2>Loss, not competition, to blame?</h2>
<p>My team (one of the 45 involved in the meta-analysis) used a number-guessing game between two people as an instance of competition. This was followed by an individual game of honesty, which was our measure for the effects on morality. </p>
<p>This individual experiment resulted in a small negative overall effect of competition (<em>d</em> = –0.1) much like the meta-analysis, but it failed to reach statistical significance on its own. </p>
<p>However, exploratory analysis of our results revealed a potential breakthrough.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/oh-the-morality-why-ethics-matters-in-economics-5963">Oh, the morality: why ethics matters in economics</a>
</strong>
</em>
</p>
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<p>We found it was only the losers of the number-guessing game who became more dishonest, with a larger effect (<em>d</em> = –0.34). The winners of the competition stage, on the other hand, showed no change in their honesty behaviour. </p>
<p>These exploratory results – yet to be replicated – suggest a reason why competition does not affect morality much on average. Perhaps it is being disadvantaged in a competitive process that corrupts, not competition per se.</p><img src="https://counter.theconversation.com/content/207026/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Ozan Isler is a research fellow at the University of Queensland's School of Economics. He acknowledges funding from the Templeton Religion Trust for an international research grant on religious belief and moral behavor.</span></em></p>Do competitive, market-like interactions encourage immoral behaviour? A study of 18,000 people in 45 experiments shows there’s no simple answer.Ozan Isler, Research Fellow, School of Economics, The University of QueenslandLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2067162023-05-31T16:33:23Z2023-05-31T16:33:23ZDebate: The end of the internal-combustion car: why competition is vital to bringing about cleaner transport<figure><img src="https://images.theconversation.com/files/529318/original/file-20230531-23-4sp91i.jpeg?ixlib=rb-1.1.0&rect=0%2C14%2C1920%2C1063&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Economic studies have a record of showing competition favour innovation. </span> <span class="attribution"><a class="source" href="https://www.pxfuel.com/en/free-photo-xfbsg">Pxfuel.com</a>, <a class="license" href="http://creativecommons.org/licenses/by-sa/4.0/">CC BY-SA</a></span></figcaption></figure><p>On 7 March 2023, just as the European Council was preparing to vote on a ban on the sale of new internal combustion engine cars in Europe from 2035, something went wrong: Germany, whose vote was essential for the measure to be approved, and a coalition of six other European countries <a href="https://edition.cnn.com/2023/03/24/cars/eu-combustion-engine-debate-climate-intl/index.html">blocked the vote on the text</a>, pushing the legislation back indefinitely.</p>
<p>A few days later, the European Commission, representing all the member countries, unveiled its response to the US Inflation Reduction Act (IRA), the <a href="https://single-market-economy.ec.europa.eu/publications/net-zero-industry-act_en">Net-Zero Industry Act</a>, a competitiveness plan based on accelerating the green transition.</p>
<p>Amid all the political back-and-forths, one would be forgiven for asking oneself whether Europe is making any progress with the green transition. It would appear the <a href="https://theconversation.com/fr/topics/union-europeenne-ue-20281">European Union</a> (EU) has become Janus, with a pro-transition face and a procrastinating face, just as a pro-competition face contrasts with a protectionist face. The consequence of such contradictions is a loss of credibility when it comes to achieving its objectives, and a delay in the race toward ecological transition.</p>
<h2>A lead to maintain</h2>
<p>Yet the EU seemed well on the way to establishing itself as a world leader in the transition, with its dynamic green ecosystem made up of innovative businesses supported by the “European Climate Bank”, as the EIB (European Investment Bank) likes to call itself. At the end of February, the EIB reaffirmed its intention to <a href="https://www.eib.org/fr/press/all/2023-077-eib-group-forum-president-hoyer-signals-readiness-to-boost-green-energy-finance-in-support-of-eu-autonomy-competitiveness">champion green initiatives</a> by channelling the vast majority of its funds toward the transition, beyond the already honourable level of 60% achieved by 2022.</p>
<p>The EU also seems to be particularly ahead of the game on green hydrogen, boasting a number of <a href="https://competition-policy.ec.europa.eu/state-aid/legislation/modernisation/ipcei_en">important projects of European interest</a> (IPCEI), the <a href="https://www.h2-mobile.fr/actus/hydrogene-europe-domine-production-mondiale-brevets/">world’s leading number of patents</a> (ranking last January by the International Energy Agency) and an embryonic <a href="https://www.eesc.europa.eu/en/our-work/opinions-information-reports/opinions/eu-hydrogen-bank">hydrogen bank</a>.</p>
<p><a href="https://fr.statista.com/infographie/29123/production-hydrogene-nombre-de-depots-de-brevets-par-pays-ou-region/" title="Hydrogen production: Europe leads the race for patents"><img src="https://cdn.statcdn.com/Infographic/images/normal/29123.jpeg" alt="Hydrogen production: Europe leads the race for patents" width="100%" height="auto"></a></p>
<p><em>You can find more infographics at <a href="https://fr.statista.com/graphique-du-jour/">Statista</a>.</em></p>
<p>This position is confirmed by foreign investors who find themselves attracted to the bloc’s green policies and regulatory clout. Take the latest <a href="https://taxation-customs.ec.europa.eu/carbon-border-adjustment-mechanism_en">Border Carbon Tax Mechanism</a> (CBAM), which is set to place a carbon price on imports entering the European single market from non-EU countries from this autumn: It is a textbook example of how to take into account negative ecological impacts while respecting competition thanks to the price signal. The recent revaluation of the price of a tonne of CO<sub>2</sub> above 100 euros suggests that it will be very effective indeed.</p>
<p><div data-react-class="Tweet" data-react-props="{"tweetId":"1628580170948018176"}"></div></p>
<p>That’s if we don’t undermine it with exemptions and deferrals <em>sine die</em>, or disguised pollution subsidies such as France’s energy <a href="https://www.service-public.fr/particuliers/actualites/A15944?lang=en">“tariff shield”</a>). According to the IEA, Europe spent nearly <a href="https://www.iea.org/reports/fossil-fuels-consumption-subsidies-2022">350 billion euros</a> on such measures in 2022 - a record high.</p>
<p>To give businesses and investors the certainty that the EU won’t be going backwards, we need to set clear, consistent targets and stick to them. It is essential to anchor players’ expectations on a fixed and certain horizon so that markets can be challenged, competition can be triggered, and private investment can flow. Any form of renunciation by the EU will discourage players from speeding up the transition and will cause those who were ahead of schedule in reaching the 2035 horizon to backpedal.</p>
<h2>Avoiding “the tragedy of the horizon”</h2>
<p>To remain competitive, French carmaker Renault has focused its clean-car strategy on its <a href="https://www.usinenouvelle.com/article/a-quoi-ressemblera-le-pole-electricity-de-renault-dans-les-hauts-de-france.N1112619">electricity division</a> and split its activities into <a href="https://www.agefi.fr/news/entreprises/renault-se-reorganise-en-cinq-poles">five divisions</a> – Ampere (clean vehiciles), Power (thermal and hybrid motors), Alpine (sport), Mobilize (new forms of mobility) and The Future Is Neutral (circular economy). Power is intended to be supported in part by the profits from the project “Horse”, which involves a joint venture with the Chinese carmaker Geely.</p>
<p>Stellantis – the parent company of Chrysler as well as European brands such as Peugeot, Citroën, Fiat and and Alfa Romeo – has also positioned itself in the premium segment of the clean-car market, alongside other players such as Tesla of the US and French energy giant TotalEnergies, which is equipping its service station network with recharging stations. These moves demonstrate the decisive role of competition in developing a range of products and services in line with the imperatives of the energy transition.</p>
<p>[<em>More than 85,000 readers look to The Conversation France’s newsletter for expert insights into the world’s most pressing issues</em>. <a href="https://memberservices.theconversation.com/newsletters/?nl=france&region=fr">Sign up now</a>]</p>
<p><a href="https://www.alternatives-economiques.fr/dictionnaire/definition/97466">Open markets</a> allow new players to join or withdraw on terms that suit them, thus fostering competition and innovation. This virtuous circle is essential to overcoming the technological frontier of transition – the most advanced level of research at a given time – and get a jump on tomorrow’s solutions. In <a href="https://www.jstor.org/stable/3502156">theory</a>, an economy that’s open to competition leads to sophistication in the value proposition of offerings and to <a href="https://www.lesechos.fr/2004/01/marche-contestable-1060294">shared value for all</a>: quality of service and lower prices to the benefit of demand greater returns on innovation and scale and attraction of scarce resources to the benefit of supply.</p>
<p>The longer the European Union postpones its objectives and gives in to protectionist pressures, the longer it will be locked into what former Canadian central banker Marc Carney has called the <a href="https://www.bankofengland.co.uk/speech/2015/breaking-the-tragedy-of-the-horizon-climate-change-and-financial-stability">tragedy of the horizon</a>, and so the more it will fall behind its rivals. The EU would benefit from remaining consistent with its founding principle of competition and its <a href="https://institutdelors.eu/wp-content/uploads/2018/01/171024jdigrundfreiheitenenwebeinzelseitena4.pdf">four fundamental freedoms</a> (movement of goods, capital, services and people) to attract the capital needed for the transition and the infrastructure essential for its spread (such as electric charging stations) and acceptability.</p>
<p>At a time when the United States has strayed into protectionism, the EU must stand firm on its commitments and remain faithful to competition, the virtues of which will accelerate the transition and its spread with accessible solutions. It’s time to move on from <a href="https://www.gfmag.com/magazine/january-2023/nouriel-roubini-interview">“greenwishing”</a>, as the American economist Nouriel Roubini called it ironically, to <em>green-enacting</em> thanks to a winning combination of <a href="https://competition-policy.ec.europa.eu/consumers/why-competition-policy-important-consumers_fr">competitiveness and attractiveness</a>.</p><img src="https://counter.theconversation.com/content/206716/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Les auteurs ne travaillent pas, ne conseillent pas, ne possèdent pas de parts, ne reçoivent pas de fonds d'une organisation qui pourrait tirer profit de cet article, et n'ont déclaré aucune autre affiliation que leur organisme de recherche.</span></em></p>Faced with a Germany-led coalition seeking to ban internal-combustion-engine car sales from 2035, the EU needs to stay firm on its core economic principles.Anna Souakri, Affiliate Professor in Strategy/Innovation & Researcher at Square Management, ESCP Business SchoolJean-Marc Daniel, Emeritus associate Professor, Law Economics & Humanities, ESCP Business SchoolLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2033022023-04-09T12:07:37Z2023-04-09T12:07:37ZGiving Canadians the ‘right to repair’ empowers consumers, supports competition and benefits the environment<figure><img src="https://images.theconversation.com/files/519551/original/file-20230405-18-gpwqb.jpg?ixlib=rb-1.1.0&rect=10%2C0%2C6698%2C3480&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The right to repair means that consumer goods can be fixed and maintained by anyone.</span> <span class="attribution"><span class="source">(Shutterstock)</span></span></figcaption></figure><p>On March 28, <a href="https://www.budget.canada.ca/2023/home-accueil-en.html#downloads">the Canadian government’s budget announcement</a> introduced a plan to implement a “<a href="https://arstechnica.com/gadgets/2023/03/right-to-repair-rules-for-electronics-appliances-targeted-for-2024-canada-says/">right to repair</a>” for electronic devices and home appliances in 2024, alongside a new five-year tax credit worth $4.5 billion for Canadian clean tech manufacturers. The federal government will begin consultations on the plan in the summer.</p>
<p>The <a href="https://www.ifixit.com/News/61140/what-is-right-to-repair">right to repair</a> allows consumers to repair goods themselves or have them repaired by original equipment manufacturers (OEMs) or at independent repair shops. Key elements of the right is that repair manuals, tools, replacement parts and services must be available at competitive prices.</p>
<p>Right-to-repair movements have sprung up in the <a href="https://www.repair.org/aboutus">United States</a>, <a href="https://repair.eu/about/">Europe</a>, <a href="https://www.right2repair.org.za/home/">South Africa</a>, <a href="https://www.cleanup.org.au/australianrepairnetwork">Australia</a> and <a href="https://policyoptions.irpp.org/magazines/may-2021/canada-needs-right-to-repair-legislation/">Canada</a>, encompassing a range of products. Most familiar might be efforts to allow consumers to choose independent shops to repair their phones and computers. </p>
<p>But the right to repair also involves battles over who should be able to fix Internet of Things devices (all physical objects related to accessing the internet), as well as other products that function via embedded software systems, such as vehicles, agricultural equipment and medical equipment.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/519552/original/file-20230405-22-enm704.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="in a library, a man in a white cap holds a circuit board while another man walks past" src="https://images.theconversation.com/files/519552/original/file-20230405-22-enm704.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/519552/original/file-20230405-22-enm704.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/519552/original/file-20230405-22-enm704.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/519552/original/file-20230405-22-enm704.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/519552/original/file-20230405-22-enm704.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/519552/original/file-20230405-22-enm704.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/519552/original/file-20230405-22-enm704.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">A volunteer repairs a circuit board in Malmo, Sweden, at a fortnightly repair café as part of an international grassroot network calling for the right to repair.</span>
<span class="attribution"><span class="source">(AP Photo/James Brooks)</span></span>
</figcaption>
</figure>
<h2>Discouraging self-repair</h2>
<p>For too long the right to repair has been a casualty of the digital economy. Many manufacturers have <a href="https://www.vice.com/en/article/xgdazj/john-deere-hit-with-class-action-lawsuit-for-alleged-tractor-repair-monopoly">long discouraged or outright prohibited</a> independent repair. They do this in part by threatening penalties for copyright infringement or by voiding warranties for products repaired by independent shops or using non-OEM parts. </p>
<p>The corporate power to deny repair is possible because <a href="https://doi.org/10.14763/2019.2.1405">companies that control the digital hearts of software-enabled products</a> can use copyright law to restrict their customers or third-party services from fixing these products. Today, this includes everything from laptops to refrigerators, vacuum cleaners, tractors and fitness wearables.</p>
<p>Identifying problems with software-enabled goods often necessitates the use of diagnostic software, while undertaking repairs often requires copying all or part of the product software. However, manufacturers’ licensing agreements typically prohibit any actions, including repair, that copy or alter the product’s software. </p>
<p>The manufacturers contend that such actions constitute copyright infringement. Companies typically cite this provision to prohibit any repairs undertaken by individuals not licensed by the original manufacturer. Companies may not actually sue customers for copyright infringement, <a href="https://www.vice.com/en/article/qjdjnv/apples-independent-repair-program-is-invasive-to-shops-and-their-customers-contract-shows">but they may target independent repair shops</a>.</p>
<p>Such tactics may discourage self-repair or the use of independent service people.</p>
<h2>Consumer pushback</h2>
<p>Questions of who can repair products and under what circumstances are fundamental to the nature of ownership and control. In fact, control over intangible forms of knowledge such as intellectual property and software-enabled goods is <a href="https://rowman.com/ISBN/9781538160879/The-New-Knowledge-Information-Data-and-the-Remaking-of-Global-Power">central to exerting power in the knowledge economy</a>.</p>
<p>The right-to-repair movement can be understood as a consumer pushback against the commodification of knowledge and a battle over who should be allowed to control and use knowledge — to repair, tinker or innovate — and in whose interests.</p>
<p>Battles over the right to repair have particular relevance for Canada. Major manufacturers, often headquartered in the U.S. or Europe, set rules regarding repair that <a href="https://www.accc.gov.au/focus-areas/market-studies/agricultural-machinery-market-study">privilege their business models</a>. These rules favour their branded suppliers and authorized repair technicians to <a href="https://www.bloomberg.com/news/articles/2022-01-20/john-deere-is-facing-a-farmer-revolt-over-the-right-to-repair#xj4y7vzkg">maximize control over repair services</a>. </p>
<p>This not only shuts out Canadian third-party businesses that supply replacement parts and repair services, but also disadvantages Canadian consumers.</p>
<figure>
<iframe width="440" height="260" src="https://www.youtube.com/embed/C1VDtcUrsVA?wmode=transparent&start=0" frameborder="0" allowfullscreen=""></iframe>
<figcaption><span class="caption">CBC covers right to repair and the 2023 federal budget.</span></figcaption>
</figure>
<h2>Effective policy development</h2>
<p>As the Canadian government prepares for consultations on implementing the right to repair, I offer several suggestions:</p>
<p>First, policymakers should build upon right-to-repair efforts elsewhere, particularly <a href="https://www.pc.gov.au/inquiries/completed/repair#report">Australia</a>, the European Union and the U.S. </p>
<p>Australia appears to be moving toward a right to repair. Its consumer watchdog agency, the Australian Competition and Consumer Commission, <a href="https://www.accc.gov.au/focus-areas/market-studies/agricultural-machinery-market-study">studied the effects of restrictive repair practices</a> on the agricultural machinery and the after-sales market in that country in 2020.</p>
<p>The European Parliament adopted resolutions on the right to repair in 2020 and 2021, and is planning a <a href="https://www.europarl.europa.eu/legislative-train/theme-a-european-green-deal/file-right-to-repair">legislative proposal</a> on the matter by mid-2023, building upon several years of working to make manufacturing and product design more eco-friendly. </p>
<p>In the U.S., President Joe Biden strengthened the case for right to repair in July 2021 with an <a href="https://www.whitehouse.gov/briefing-room/presidential-actions/2021/07/09/executive-order-on-promoting-competition-in-the-american-economy/">executive order supporting competition</a>. Recently, attorneys general from 28 states <a href="https://pirg.org/updates/28-attorneys-general-call-for-right-to-repair-legislation/">called on lawmakers to advance a right to repair federally</a>.</p>
<p>Second, it’s important to effectively counter industry opposition, <a href="https://maplightarchive.org/story/in-fight-over-the-right-to-repair-equipment-farmers-are-outspent-28-to-1/">which has been successful in defeating right-to-repair legislation</a>. Such legislation continues to face stiff industry opposition at the state level in the U.S. </p>
<p>Big companies in the technology, vehicle and agricultural industries have long <a href="https://www.washingtonpost.com/business/how-tech-firms-are-resisting-the-right-to-repair/2023/01/19/759b0da0-97f6-11ed-a173-61e055ec24ef_story.html">lobbied against the right to repair</a>. They argue that repairing or tinkering with their software-enabled products raises potentially serious security and safety complications. </p>
<p>Though such concerns may be valid in some cases (particularly when dealing with safety-critical goods such as medical devices), these are exceptions. In many cases, however, independent repair by appropriately trained technicians can be a safe, viable alternative to manufacturers’ “authorized” repairs.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/519558/original/file-20230405-14-h0at9h.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="a stall at a secondhand market with books on a table, clothes on a hangline, and household objects piled up" src="https://images.theconversation.com/files/519558/original/file-20230405-14-h0at9h.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/519558/original/file-20230405-14-h0at9h.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=450&fit=crop&dpr=1 600w, https://images.theconversation.com/files/519558/original/file-20230405-14-h0at9h.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=450&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/519558/original/file-20230405-14-h0at9h.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=450&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/519558/original/file-20230405-14-h0at9h.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=566&fit=crop&dpr=1 754w, https://images.theconversation.com/files/519558/original/file-20230405-14-h0at9h.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=566&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/519558/original/file-20230405-14-h0at9h.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=566&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">A right to repair supports the circulation of secondhand goods.</span>
<span class="attribution"><span class="source">(Jon Tyson/Unsplash)</span></span>
</figcaption>
</figure>
<p>Third, policymakers should ensure broad engagement with and representation from the people who are most affected by restrictive repair policies. These include small farmers, independent repairers, small retailers of refurbished goods, people who patronize second-hand or reseller stores, and those in the <a href="https://www.accc.gov.au/focus-areas/market-studies/agricultural-machinery-market-study">aftermarket industry</a> selling third-party parts. </p>
<p>Input is also needed from people living outside major population centres who must travel to authorized repair shops or otherwise incur costs in time and money in receiving service.</p>
<p>Fourth, it’s time to recognize that the right to repair has benefits beyond consumer rights. Repair bolsters secondary markets, including second-hand stores and resellers that provide their customers with viable used goods, <a href="https://www.ftc.gov/reports/nixing-fix-ftc-report-congress-repair-restrictions">which are important money-savers for economically marginalized communities</a>.</p>
<p>Repair also helps decrease the <a href="https://www.sierraclub.ca/en/ontario-chapter/2022-02-04/right-repair-why-we-need-it">environmental burden of modern consumerism</a>. This problem is particularly acute in the manufacture of many electronic technologies — once these products no longer function, they are dumped as e-waste, often in <a href="https://ourworld.unu.edu/en/toxic-e-waste-dumped-in-poor-nations-says-united-nations">developing countries</a>.</p>
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<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/beyond-recycling-solving-e-waste-problems-must-include-designers-and-consumers-41719">Beyond recycling: solving e-waste problems must include designers and consumers</a>
</strong>
</em>
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<p>Finally, policymakers should consider a broad interpretation of the right to repair. This could include requiring manufacturers to make available at competitive prices the necessary items for repair, including diagnostic software and replacement parts. It could restrict manufacturers’ practice of <a href="https://pirg.org/articles/6-ways-to-stop-planned-obsolescence/">planned obsolescence</a>, that is, letting functional goods be rendered inoperative by withholding essential software updates.</p>
<p>The federal government is offering Canadians a chance to create a right to repair. We should seize the opportunity.</p><img src="https://counter.theconversation.com/content/203302/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Natasha Tusikov receives funding from the Social Sciences and Humanities Research Council. She is affiliated with the Centre for International Governance Innovation.</span></em></p>The Canadian government is planning to implement ‘right to repair’ for electronic devices. This has the potential to give consumers more options, and challenges corporations’ hold over knowledge.Natasha Tusikov, Associate Professor, Criminology, Department of Social Science, York University, CanadaLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2011322023-04-03T16:26:04Z2023-04-03T16:26:04ZHere’s how the Rogers-Shaw merger could benefit Canadian customers<figure><img src="https://images.theconversation.com/files/518541/original/file-20230330-20-297ypl.JPG?ixlib=rb-1.1.0&rect=11%2C0%2C3679%2C2495&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Rogers' takeover of Shaw has been approved by the Canadian government, but the deal comes with stringent conditions.</span> <span class="attribution"><span class="source">THE CANADIAN PRESS/Sean Kilpatrick</span></span></figcaption></figure><p>The Canadian government has finally approved the <a href="https://www.cbc.ca/news/business/rogers-shaw-approval-1.6797175">$26 billion takeover of Shaw by Rogers</a> after nearly two years of delays. When the merger was <a href="https://www.globenewswire.com/news-release/2021/03/15/2192622/0/en/Rogers-and-Shaw-to-come-together-in-26-billion-transaction-creating-new-jobs-and-investment-in-Western-Canada-and-accelerating-Canada-s-5G-rollout.html">first announced by Rogers in 2021</a>, it stirred up a significant amount of competition concern. </p>
<p>The Canadian Competition Bureau <a href="https://www.canada.ca/en/competition-bureau/news/2023/01/statement-from-the-commissioner-of-competition-on-the-federal-court-of-appeals-decision-regarding-the-rogers-shaw-merger.html">was worried the merger would soften competition in the telecom industry</a>, resulting in higher prices and lower service quality for customers.</p>
<p>The bureau <a href="https://www.cbc.ca/news/business/competition-bureau-rogers-shaw-merger-1.6446827">filed a court application to block the deal in 2022</a>, but the <a href="https://www.cbc.ca/news/business/rogers-shaw-appeal-court-1.6724045">Federal Court of Appeal rejected the application</a> and the subsequent <a href="https://financialpost.com/telecom/rogers-shaw-merger-approval-appeal-court">appeal from the bureau</a>.</p>
<p>But Industry Minister François-Philippe Champagne appears to have heeded some of these concerns. <a href="https://www.canada.ca/en/innovation-science-economic-development/news/2023/03/statement-from-minister-champagne-concerning-competition-in-the-telecommunication-sector.html">In his statement on the merger</a>, the minister said the deal’s approval is contingent on a series of legally enforceable conditions for Rogers and Videotron, the company that Shaw is selling its Freedom Mobile wireless business to.</p>
<p>These conditions are to ensure this merger will, according to Champagne, “actually drive down prices across Canada.” With the advent of these conditions, this deal could end up benefiting Canadian consumers and the economy.</p>
<h2>Lowering service costs</h2>
<p><a href="https://www.ctvnews.ca/business/these-are-the-conditions-and-penalties-if-violated-of-the-rogers-shaw-deal-1.6337353">Two of the merger’s conditions</a> require Rogers to set up low-cost mobile plans for low-income Canadians, and expand its existing low-cost internet plans. Rogers has good reason to meet these conditions — if it violates any of them, it could be fined up to $1 billion.</p>
<p>Meeting these low-cost conditions shouldn’t be an issue for the merged company. According to Rogers, the <a href="https://about.rogers.com/news-ideas/rogers-and-shaw-to-come-together-in-26-billion-transaction-creating-new-jobs-and-investment-in-western-canada-and-accelerating-canadas-5g-rollout/">financial benefit of the merger will be around $1 billion annually</a>. </p>
<p>Rogers will also be able to lower service costs through integration. Since Canada is such a large country geographically, but <a href="https://www150.statcan.gc.ca/n1/pub/71-607-x/71-607-x2018005-eng.htm">relatively small population-wise</a>, it would be wasteful for Rogers to build their own infrastructure, instead of taking advantage of Shaw’s.</p>
<figure class="align-center ">
<img alt="A white middle-aged man gestures with his hands while speaking. Two Canadian flags stand behind him." src="https://images.theconversation.com/files/518801/original/file-20230331-26-xtdw0z.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/518801/original/file-20230331-26-xtdw0z.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=411&fit=crop&dpr=1 600w, https://images.theconversation.com/files/518801/original/file-20230331-26-xtdw0z.JPG?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=411&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/518801/original/file-20230331-26-xtdw0z.JPG?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=411&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/518801/original/file-20230331-26-xtdw0z.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=517&fit=crop&dpr=1 754w, https://images.theconversation.com/files/518801/original/file-20230331-26-xtdw0z.JPG?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=517&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/518801/original/file-20230331-26-xtdw0z.JPG?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=517&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Innovation, Science and Industry Minister François-Philippe Champagne speaks at a news conference about the Rogers-Shaw merger on Parliament Hill in Ottawa on March 31.</span>
<span class="attribution"><span class="source">THE CANADIAN PRESS/ Patrick Doyle</span></span>
</figcaption>
</figure>
<p>Shaw has a fibre route in western Canada that is over 12,000 kilometres long — Rogers will be able to save money by using this pre-existing route to deliver its services, instead of building new networks.</p>
<h2>Increasing internet access</h2>
<p>This merger also has the potential to play a key role in Canada’s 5G infrastructure and increasing internet access for Canadians.</p>
<p>5G is the <a href="https://www.scientificamerican.com/video/what-is-5g-here-is-short-video-primer/">fifth generation of mobile network technology</a>. It’s more reliable, faster and can handle more data than 4G can. In other words, it’s the future of wireless networks — a future Canada should capitalize on.</p>
<p>The merger’s conditions require Rogers to expand broadband internet access and 5G services across the country. This will be especially important for households in suburban and <a href="https://nationalpost.com/feature/left-behind-internet-access-rural-canada">rural areas in Canada</a>, since it’s harder for them to access fibre and internet alternatives.</p>
<p>Given that 98.6 per cent of households in urban areas can access to broadband, but <a href="https://www.ckom.com/2023/01/08/indigenous-communities-across-canada-working-to-provide-internet-access-for-underserved/">only 45.6 per cent of rural households and 34.8 per cent of First Nations reserves</a> can, the merger could benefit rural markets substantially.</p>
<h2>Revitalizing the economy</h2>
<p>5G services are estimated to <a href="https://pm.gc.ca/en/news/news-releases/2022/10/17/strengthening-canadas-position-leader-5g-and-digital-innovation">contribute $40 billion annually</a> and <a href="https://www.5gcc.ca/wp-content/uploads/2018/06/CWTA-Accenture-Whitepaper-5G-Economic-Impact_Updates_WEB_06-19-2018.pdf">250,000 jobs to Canada by 2026</a>. Another one of the merger’s conditions is that Rogers create 3,000 jobs in Western Canada and maintain them for at least a decade.</p>
<p>These new jobs will be particularly important for Alberta, where Shaw’s home office is and where the company’s western headquarters will be located. The province has been <a href="https://calgary.ctvnews.ca/alberta-analysts-closely-watching-drastic-oil-slump-1.6316500">struggling with low oil prices</a> and <a href="https://www.iisd.org/publications/search-prosperity-oil-alberta-canada">declining oil demand</a> caused by a combination of market forces and international climate policies.</p>
<p>This merger could help Alberta diversify and sustain its economy <a href="https://theconversation.com/a-provincial-sales-tax-is-the-solution-to-albertas-fiscal-roller-coaster-191147">so it no longer needs to rely so heavily on the oil industry</a> for income. It could even help transition Calgary from an oil city to a technology hub.</p>
<p>It’s important to note, however, that this merger may still increase competition in the telecom industry in the short term, despite the federal government’s attempts to mitigate this with their stringent deal conditions. But in the long run, this deal could ultimately lead to increased innovation, which in turn, <a href="https://theconversation.com/why-your-company-needs-an-innovation-strategy-in-2023-197186">would benefit consumers as well</a>.</p><img src="https://counter.theconversation.com/content/201132/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Victor Song does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The new conditions that have been heaped onto Rogers as a result of the Rogers-Shaw merger could end up benefiting Canadian consumers and the economy at large.Victor Song, Assistant Professor, Beedie School of Business, Simon Fraser UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2006122023-02-23T20:20:19Z2023-02-23T20:20:19ZMac McClung may have ‘saved’ the slam dunk contest, but scoring methods could still be improved, a dunkologist explains<figure><img src="https://images.theconversation.com/files/512040/original/file-20230223-19-vc40ce.jpg?ixlib=rb-1.1.0&rect=0%2C76%2C5684%2C3707&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Mac McClung of the Philadelphia 76ers dunks the ball during the 2023 NBA All Star AT&T Slam Dunk Contest on Feb. 18, 2023, in Salt Lake City, Utah.</span> <span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/mac-mcclung-of-the-philadelphia-76ers-dunks-the-ball-during-news-photo/1468043000?phrase=Mac%20McClung&adppopup=true">Alex Goodlett / Stringer via Getty Images</a></span></figcaption></figure><p>I grew up watching some of the greatest slam dunk artists in the world.</p>
<p><a href="https://www.legendsofbasketball.com/alumni/shawn-kemp/">Shawn Kemp</a> was one of my favorites because he was freaky athletic and dunked so powerfully. Plus, he seemed so nonchalant about everything. It made <a href="https://www.youtube.com/watch?v=RfDmNdN-8FA">his dunks</a> look effortless. </p>
<p><a href="https://www.nba.com/news/history-legend-dominique-wilkins">Dominique Wilkins</a> just jumped <a href="https://www.youtube.com/watch?v=lKYhNbslDh8">so high on every dunk</a>. His limbs are long and he would <a href="https://www.youtube.com/watch?v=0Ja4Cb7I9h4">windmill the ball</a> so far around and then dunk hard on the rim like a sledgehammer.</p>
<p><a href="https://www.basketball-reference.com/players/w/walkeke01.html">Kenny “Sky” Walker</a> was my biggest inspiration, because I felt as if we jumped alike, and he did a lot of <a href="https://www.youtube.com/watch?v=W7PaSXpy8kQ">360s</a>. He swung and whirled the ball about, kicking his legs and dunking aggressively. That’s why I liked doing those 360s on a 6-foot-high rim back in the 1990s when I was in elementary school.</p>
<p>I also drew inspiration from my dad. One day my dad and I were shooting baskets with a volleyball. I begged him to dunk it. Even though he was exhausted from a day of construction work, he dunked it hard, all his limbs outstretched. The impact ripped open his finger and he began to bleed. Despite the injury, I was just in awe that he had dunked the ball. I thought the whole thing was so cool.</p>
<p>Today, my fondness for dunking remains, but on a much higher plane. I study dunks, so that makes me a <a href="https://scholar.google.com/citations?user=u37g8KEAAAAJ&hl=en">dunk scientist</a>. Or you might say I’m a dunkologist.</p>
<p>So whenever I watch the NBA’s annual slam dunk contest – like the one that <a href="https://www.cbssports.com/nba/news/who-is-mac-mcclung-former-high-school-phenom-breaks-out-as-2023-slam-dunk-champion-at-nba-all-star-weekend/">Philadelphia 76ers’ Mac McClung won</a> with a <a href="https://clutchpoints.com/knicks-news-mac-mcclung-viral-540-dunk-gets-brutally-honest-take-from-evan-fournier">turnaround slam on Feb. 18, 2023</a> – I don’t watch just to be entertained. As chairman of the technical committee for the <a href="https://wda.do/">World Dunk Association</a> – a group formed in 2020 to build more appreciation for the slam dunk – I also look to improve upon a <a href="https://wda.do/dunks">new system</a> we have developed offering a more scientific approach toward how judges score slam dunks. </p>
<figure>
<iframe width="440" height="260" src="https://www.youtube.com/embed/H854e_GFV_U?wmode=transparent&start=0" frameborder="0" allowfullscreen=""></iframe>
<figcaption><span class="caption">A basketball player breaks down the science of how he does a slam dunk.</span></figcaption>
</figure>
<p>Growing up, I remember seeing “style, athleticism and creativity” mentioned during NBA broadcasts as factors for slam dunk judges to consider. But it wasn’t until I embarked upon my journey to become a researcher that I began to wonder if the slam dunk judges might be using more sophisticated criteria. </p>
<p>As my colleague Evan Rollins and I wrote in a <a href="https://doi.org/10.3233/JSA-190242">peer-reviewed paper</a> published in 2019 in the <a href="https://journalofsportsanalytics.com/">Journal of Sports Analytics</a>, dunk scores – <a href="https://www.nba.com/news/2022-att-slam-dunk">now given on a scale of 6 to 10</a> – are not always awarded as fairly and consistently as you might hope or expect.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/445314/original/file-20220209-21-k0afz5.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="An image of a screen that depicts Slam-Dunk Champions Guidelines" src="https://images.theconversation.com/files/445314/original/file-20220209-21-k0afz5.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/445314/original/file-20220209-21-k0afz5.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=463&fit=crop&dpr=1 600w, https://images.theconversation.com/files/445314/original/file-20220209-21-k0afz5.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=463&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/445314/original/file-20220209-21-k0afz5.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=463&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/445314/original/file-20220209-21-k0afz5.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=582&fit=crop&dpr=1 754w, https://images.theconversation.com/files/445314/original/file-20220209-21-k0afz5.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=582&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/445314/original/file-20220209-21-k0afz5.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=582&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Image captured from the NBATV broadcast of 1987 NBA Slam Dunk Contest. Source: NBA.</span>
</figcaption>
</figure>
<h2>How dunks get scored</h2>
<p>I created a database to capture data from <a href="https://www.youtube.com/playlist?list=PLWv5aFyC0z2v0bV1DpOD5XLAIU-a45BB1">every dunk I could find</a> for contests going all the way back to 1984. As of February 2022, the database contains information on more than 700 dunks.</p>
<p>Only about 45% of a player’s dunk score is based on what they do with their body or the ball, our analysis found. We found about 28% of a dunker’s score is based on factors that have nothing to do with the actual dunk, such as whether or not the contest took place in the hometown of the dunker or the dunker’s team. When a dunker’s team or hometown hosted the contest, their dunks were often scored higher than they would have been if the contest were held somewhere else.</p>
<p>Other factors included the player’s popularity – as measured by the number of mentions in the media. But a player’s popularity is often based on the player’s skill, so we don’t know if player popularity is a cause of – or simply correlated with – scoring high on a slam dunk.</p>
<figure class="align-right zoomable">
<a href="https://images.theconversation.com/files/447323/original/file-20220218-47068-hzhzeb.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="A basketball player does a slam dunk." src="https://images.theconversation.com/files/447323/original/file-20220218-47068-hzhzeb.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/447323/original/file-20220218-47068-hzhzeb.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=899&fit=crop&dpr=1 600w, https://images.theconversation.com/files/447323/original/file-20220218-47068-hzhzeb.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=899&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/447323/original/file-20220218-47068-hzhzeb.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=899&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/447323/original/file-20220218-47068-hzhzeb.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1130&fit=crop&dpr=1 754w, https://images.theconversation.com/files/447323/original/file-20220218-47068-hzhzeb.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1130&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/447323/original/file-20220218-47068-hzhzeb.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1130&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Slam dunks are an impressive feat in basketball.</span>
<span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/antonius-cleveland-of-the-hawks-dunk-the-ball-during-the-news-photo/1371250899?adppopup=true">Jenny Evans/Getty Images</a></span>
</figcaption>
</figure>
<p>The influence of non-dunk-related factors made me want to discover new methods to judge and score slam dunks. My pursuit led me to the World Dunk Association, which was started in 2020 by <a href="https://www.zianimalacademy.com/en/kadour-ziani/">Kadour Ziani</a>, a retired professional dunker, and <a href="https://damln.com/">Damian Le Nouaille-Diez</a>, a software engineer, author and entrepreneur. Turns out Kadour and Damian had devised a <a href="https://wda.do/dunks">system to classify dunks</a> that was very much like the one Evans and I published in 2019. </p>
<p>As our association continues to work on <a href="https://wda.do/dunks">new and better ways</a> to enable judges – and the general public – to score dunks, here are five things to keep in mind whenever you watch a slam dunk contest.</p>
<h2>1. Disregard things that are not part of the actual dunk</h2>
<p>Be careful of theatrics such as <a href="https://youtu.be/0WUeB6oXlZs?t=447">singing choirs</a>, <a href="https://youtu.be/x0t_zZGrf1Y?t=37">clever passes from a teammate</a>, <a href="https://youtu.be/lpxA0woG-Ow?t=13">changing</a> <a href="https://youtu.be/3P4syCF4D2A?t=372">jerseys</a> and <a href="https://youtu.be/gzR01hZc4pI?t=14">other features</a> that do not meaningfully alter how the dunker executes ball movements and body actions. </p>
<p><a href="https://youtu.be/QKJtHJBFUdw?t=27">Jumping over a</a> <a href="https://youtu.be/hzZq1QOOeNY">celebrity</a> is no different from jumping over an ordinary person of the same height. All these activities are exciting and entertaining, but they do not reflect what the dunker actually does. </p>
<h2>2. Flight: Elevation, distance and obstacles</h2>
<p>Flight involves how high the dunker jumps, how far they jump and – if they jump over something – the size of an obstacle they jump over.</p>
<p>A simple way to check how high the dunker jumps is by looking for the highest point of their head relative to the bottom of the net and basket. This is easier than checking distance between the hips and the floor, because the dunk happens so quickly and jerseys can make it hard to visually locate the hip.</p>
<p>Distance is simply how far the point of takeoff is from the basket.</p>
<p><a href="https://youtu.be/1EfYwBb2iho?t=100">Jumping over obstacles is impressive</a> because it makes all other parts of the dunk more difficult. However, always check whether the dunker <a href="https://youtu.be/DqNaPewELqc?t=4">pushes off</a> <a href="https://youtu.be/ahmWFI8lKLQ?t=36">the obstacle</a> while jumping over it because pushing up increases the upward force and, when done properly, will allow them to elevate higher than they are truly able to jump. </p>
<figure class="align-left zoomable">
<a href="https://images.theconversation.com/files/447316/original/file-20220218-48814-f9c2s3.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Two judges hold up score cards amid a crowd of people." src="https://images.theconversation.com/files/447316/original/file-20220218-48814-f9c2s3.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/447316/original/file-20220218-48814-f9c2s3.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=401&fit=crop&dpr=1 600w, https://images.theconversation.com/files/447316/original/file-20220218-48814-f9c2s3.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=401&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/447316/original/file-20220218-48814-f9c2s3.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=401&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/447316/original/file-20220218-48814-f9c2s3.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=504&fit=crop&dpr=1 754w, https://images.theconversation.com/files/447316/original/file-20220218-48814-f9c2s3.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=504&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/447316/original/file-20220218-48814-f9c2s3.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=504&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Sometimes players will perform tricks while in the air.</span>
<span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/president-george-w-bush-holds-up-a-10-as-he-judges-a-slam-news-photo/51725075?adppopup=true">Mike Theiler/AFP via Getty Images</a></span>
</figcaption>
</figure>
<h2>3. Style: Watching what is done in the air</h2>
<p>Once airborne, dunkers perform tricks with the ball and gymnastics with their bodies.</p>
<p>Watch for whether their overall bodily movements are smooth and extended or jerky and abbreviated. Fully outstretching arms and extended, smoother movements demand greater strength and flexibility to maintain control of the ball and body while airborne. If a dunker has trouble maintaining control of the ball and their body in the air, the arms and legs will be less extended and movements will be abbreviated.</p>
<h2>4. Power: Watching the finish</h2>
<p>Watch for a powerful and clean finish in which the ball is dunked at a high velocity without bumping the rim. On more <a href="https://youtu.be/-OJMLCF5oK4?t=10">powerful dunks</a> there will also be greater movement of the net side to side or upward out of the basket.</p>
<figure>
<iframe width="440" height="260" src="https://www.youtube.com/embed/-OJMLCF5oK4?wmode=transparent&start=0" frameborder="0" allowfullscreen=""></iframe>
<figcaption><span class="caption">Vince Carter performing a powerful 360 windmill dunk in the 2000 NBA Slam Dunk Contest.</span></figcaption>
</figure>
<h2>5. Innovation: Enjoy it</h2>
<p>Dunkers can invent new <a href="https://youtu.be/FTOUnB27pVE">ball movements</a> and introduce never-before-seen <a href="https://youtu.be/e4Au8Y_0ZN0">variations</a>. Sometimes they dream up entertaining ways to showcase their abilities, such as <a href="https://youtu.be/HnBCN53rO2g?t=78">slapping a sticker high on the backboard</a>, <a href="https://youtu.be/fBYLPU_DxX8?t=159">grabbing a stuffed animal hanging</a> from the rim with their mouth or <a href="https://www.youtube.com/watch?v=GHSdvLILMFY&t=59s">blowing out a lit birthday candle</a> that is on the rim as part of the dunk.</p>
<p>Whereas the 2022 slam dunk contest has been called “<a href="https://www.wkyc.com/article/sports/nba/nba-all-star-game/social-media-rips-nba-dunk-contest/95-f045e947-1a3f-4014-bf64-c923e33cd1f2">the weakest ever</a>,” some, such as Shaquille O'Neal, are saying that Mac McClung may have “<a href="https://www.npr.org/2023/02/20/1158357296/mac-mcclung-nba-all-star-slam-dunk-contest-shaq-highlights">saved the contest</a>” in 2023.</p>
<p>Indeed, McClung dazzled – but he was not alone. The other contestants – Trey Murphy III, Jericho Sims and Kenyon Martin Jr. — put on a show as well, performing athletically demanding dunks. Notably, 10 of the 12 total dunks in 2023 were made on the first try, far greater than four of 12 in 2022. Although McClung won with an <a href="https://youtu.be/-gD4iASNf9k">array of amazing dunks</a>, Murphy’s <a href="https://youtu.be/OlPStUoWXeY">180 two-handed tomahawk-to-windmill</a> with a reverse finish should not be overlooked.</p>
<figure>
<iframe width="440" height="260" src="https://www.youtube.com/embed/GN2OCU8Si-k?wmode=transparent&start=0" frameborder="0" allowfullscreen=""></iframe>
<figcaption><span class="caption">Highlights for Trey Murphy from the 2023 NBA Slam Dunk Contest.</span></figcaption>
</figure>
<p>My favorite dunks are the ones – just like the ones I used to watch as a kid – that inspire me to go to the court and create my own.</p>
<p><em>This is an updated version of an article <a href="https://theconversation.com/dunkology-176688">originally published on Feb. 18, 2022</a>.</em></p><img src="https://counter.theconversation.com/content/200612/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Justin Barber does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>NBA player Mac McClung may have just ‘saved’ the annual dunk contest, but scoring methods could still be improved, a dunking expert says.Justin Barber, Clinical Research Manager, University of KentuckyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1986382023-01-27T15:45:37Z2023-01-27T15:45:37ZThe ‘levelling up’ bidding process wastes time and money – here’s how to improve it<p>The UK government recently <a href="https://www.gov.uk/government/publications/levelling-up-fund-round-2-successful-bidders">announced</a> the results of the second round of successful bids for for its £4.8 billion Levelling Up Fund. This money is provided to local governments with the ambitious (but pretty unspecific) aim of “<a href="https://levellingup.campaign.gov.uk/">creating opportunities for everyone</a>” by addressing economic and social imbalances across the UK. </p>
<p>Winning projects have received as much as £50 million. In this round, the money will be used for ventures including building <a href="https://www.edenproject.com/media-relations/morecambes-eden-project-north-granted-planning-permission">Eden Project North</a> on Morecambe’s seafront and improving railway infrastructure across the UK. Smaller grants will go to projects involving electric buses, theatre and castle renovations, and new leisure centres and affordable housing. </p>
<p>All of the applicants – whether they won funding or not – have one thing in common: they all participated in a competitive bidding process. And while most bids for funding were not selected (out of 529 applications, only 111 will receive levelling up money in this round), they all represent hundreds of hours of work by <a href="https://www.local.gov.uk/case-studies/implementing-external-funding-strategy">in-house specialists</a> in local government, and sometimes paid external consultants as well.</p>
<p>Which is why it’s all the more disappointing for the losing bids. The almost 80% of local councils who were rejected not only lost a project in which they believed, but also the time, money and energy spent preparing the bid. </p>
<p>Now there will be no multifunctional square <a href="https://www.wigantoday.net/news/politics/disappointment-for-wigans-failed-bids-despite-ps20m-success-for-levelling-up-cash-3994196">in Wigan</a>, and Bradford can forget about its <a href="https://www.thetelegraphandargus.co.uk/news/23262611.reaction-4-bradford-schemes-fail-attract-levelling-fund-cash/">advanced robotics centre</a>. Well, for now anyway. Local councils will get <a href="https://www.gov.uk/government/news/landmark-levelling-up-fund-to-spark-transformational-change-across-the-uk">another chance</a> to invest their time and money all over again, when they prepare bids for the next round of levelling up funding (at an as-yet unspecified date). </p>
<p>But research shows that there are ways to make the process more efficient and effective the next time around.</p>
<h2>The levelling up beauty contest</h2>
<p>So-called “beauty contests” – as the process for winning such funding is often described – are ubiquitous in UK local government funding. Around a third of the more than 450 grant schemes <a href="https://www.local.gov.uk/sites/default/files/documents/Fragmented%20Funding_final.pdf">identified by the Local Government Association</a> involve competitive bidding.</p>
<p>The cost of preparing a typical application is estimated to be <a href="https://www.localis.org.uk/wp-content/uploads/2014/07/loc_competitivebidding.pdf">between £20,000 and £30,000</a>. This is a lot of money at any time, but particularly as many local councils are experiencing <a href="https://www.ft.com/content/562bdd76-f242-47e6-9deb-a3beeaebe732">unprecedented budget cuts</a>. </p>
<figure class="align-center ">
<img alt="Prize Winning Award for Winner of Miss Beauty Queen Pageant Contest is Sash, Diamond Crown, studio lighting abstract dark draping textile background" src="https://images.theconversation.com/files/506803/original/file-20230127-3249-9lnq48.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/506803/original/file-20230127-3249-9lnq48.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=286&fit=crop&dpr=1 600w, https://images.theconversation.com/files/506803/original/file-20230127-3249-9lnq48.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=286&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/506803/original/file-20230127-3249-9lnq48.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=286&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/506803/original/file-20230127-3249-9lnq48.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=360&fit=crop&dpr=1 754w, https://images.theconversation.com/files/506803/original/file-20230127-3249-9lnq48.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=360&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/506803/original/file-20230127-3249-9lnq48.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=360&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">When projects compete for funding, it’s often referred to as a ‘beauty contest’.</span>
<span class="attribution"><span class="source">Jade ThaiCatwalk/Shutterstock</span></span>
</figcaption>
</figure>
<p>According to the <a href="https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1091240/Round_2_LUF_Applicant_Guidance_20220706.pdf">52 pages of official guidance</a> for the Levelling Up Fund, bidders had to explain how they would divide the requested amount into the three investment themes of the fund and their sub-categories. They had to provide explanations of why their project aligns with existing central government strategies and the various missions of the <a href="https://www.gov.uk/government/publications/levelling-up-the-united-kingdom">Levelling Up white paper</a>. They also had to answer dozens of specific questions about the project, and complete a cost-benefit analysis over the lifetime of the investment. </p>
<p>But that’s not all. The bids then have to be read and evaluated by civil servants before going through <a href="https://www.gov.uk/guidance/levelling-up-fund-round-2-explanatory-note-on-the-assessment-and-decision-making-process">several more rounds of ranking and tweaking</a> by senior politicians, (<a href="https://onlinelibrary.wiley.com/doi/full/10.1111/1467-923X.12970">who may well have their own objectives</a>).</p>
<h2>Weighing up the costs and benefits</h2>
<p>Asking for detailed business cases helps rationalise decision-making during these kinds of processes. Beyond the basic financial evaluation, a <a href="https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1126348/TAG_Unit_A1.1_-_Cost_Benefit_Analysis_Nov_2022_Accessible_v1.0.pdf.pdf">cost-benefit analysis</a> aims to measure the broader economic value of each project. </p>
<p>Winning project Eden North in Morecambe <a href="https://www.lancaster.gov.uk/news/2022/aug/eden-project-north-levelling-up-fund-bid-for-50m-submitted-to-government">claims</a>, for instance, that it will indirectly lead to more than 1,000 new jobs in a deprived region by attracting 740,000 visitors a year.</p>
<p>Indirect benefits are often non-monetary. Public transport projects typically have to put a value on <a href="https://www.sciencedirect.com/science/article/pii/S0967070X09000808?casa_token=OxtrGX7I1kIAAAAA:uUz0L3Og4rbTO5GyY-vXWr2IkcRHWDGNY-rMezf-v0QKnnFryXuVt1jiaIMCXTTnoNGzF3I">estimated decreases in transportation times</a>, <a href="https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/221088/pb12637-icgb.pdf">air pollution</a>, and <a href="https://road-safety.transport.ec.europa.eu/system/files/2021-07/cost_benefit_analysis.pdf">road injuries</a>, for example.</p>
<p>But <a href="https://journals.sagepub.com/doi/abs/10.1177/109114210203000204">comparing different cost-benefit analyses</a> can mean ranking the <a href="https://www.gov.uk/government/publications/valuation-of-risks-to-life-and-health-monetary-value-of-a-life-year-voly">value of a human life</a> versus that of a rare bird, for example, or even <a href="https://www.pnas.org/doi/10.1073/pnas.1315987111">present costs versus future benefits</a>.</p>
<p>So while useful, such assessments are often not very precise when comparing things as different as a railway upgrade in Cornwall with a city centre regeneration project in Yorkshire. Research also shows these tools often select <a href="https://academic.oup.com/oxrep/article/25/3/344/424009">the kinds of projects most likely to see cost overruns</a>. And drawing conclusions about small differences between generally “good” projects in this way can be pretty meaningless. </p>
<p>Unfortunately, creating precise but meaningless rankings often happens when resources are scarce. Prospective students craft their best <a href="https://www.hepi.ac.uk/2022/11/24/ucas-personal-statements-create-inequality-and-should-be-replaced-by-short-response-questions/">personal statements</a> to get into their dream schools, and researchers submit lengthy proposals to access <a href="https://www.pnas.org/doi/full/10.1073/pnas.1714379115">increasingly competitive</a> grant money. But research shows these review processes are <a href="https://www.pnas.org/doi/abs/10.1073/pnas.1714379115">often no better than random</a>, and unable to <a href="https://www.bmj.com/content/343/bmj.D4797.abstract">consistently rank</a> good projects.</p>
<figure class="align-center ">
<img alt="Miniature people: businessman standing on wooden podium with dollar bank note blur background" src="https://images.theconversation.com/files/506798/original/file-20230127-19-z16p88.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/506798/original/file-20230127-19-z16p88.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/506798/original/file-20230127-19-z16p88.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/506798/original/file-20230127-19-z16p88.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/506798/original/file-20230127-19-z16p88.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/506798/original/file-20230127-19-z16p88.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/506798/original/file-20230127-19-z16p88.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">We need new ways to rank projects bidding for funding.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/miniature-people-businessman-standing-on-wooden-741625378">feeling lucky/Shutterstock</a></span>
</figcaption>
</figure>
<h2>A new way to rank</h2>
<p>So why do we keep on ranking the unrankable? Streamlining bidding processes could save time and money by eliminating the bad projects, financing the outstanding ideas, and allocating the rest of the money randomly among the good ones. </p>
<p>However, experimental evidence shows this would be difficult in practice: <a href="https://academic.oup.com/qje/article/136/4/2195/6354797">bureaucrats</a> and politicians like to <a href="https://www.aeaweb.org/articles?id=10.1257/mic.6.4.138">be in control</a>, even if the outcome is as good as random. Humans also <a href="https://psycnet.apa.org/record/1988-20051-001">like to interpret</a> success as the result of hard work and not some sort of lottery.</p>
<p>In a <a href="https://ideas.repec.org/p/lan/wpaper/344119591.html">recent large-scale experiment</a>, I worked with <a href="https://bouacida.fr/">Elias Bouacida</a>, an assistant professor at <a href="https://www.univ-paris8.fr/en/">Paris 8 University</a>, on research which found that when given the choice, most individuals prefer to see their fate decided by a procedure that looks reasonable than by a lottery – even if they are aware that both are equally unpredictable.</p>
<p>A simple alternative – one that would be much more beneficial in terms of money and time saved on the bidding process – would be to replace competitive bidding with an allocation formula that assigns pots of money to <a href="https://www.ft.com/content/414e1f83-4d81-46f1-9f8a-84aa4a4aaa57?emailId=43ff94af-25c5-4e8e-95de-b1e7570d83ca&segmentId=2f40f9e8-c8d5-af4c-ecdd-78ad0b93926b">local governments, letting them choose</a> their own projects. </p>
<p>We could also offer fewer types of grant and allow applications to be re-used. Reducing application forms to a short cost-benefit analysis would help with this. And then applicants would simply need to trust in the imperfect outcome of a short but independent assessment by civil servants.</p>
<p>This would embrace the randomness of the outcomes, the current governmental preference for centralisation, and the human preference for the appearance of a reasonable process.</p><img src="https://counter.theconversation.com/content/198638/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Renaud Foucart works for Lancaster University, a partner of Eden Project North in Morecambe.</span></em></p>Preparing a bid for such funding can cost project hopefuls up to £30,000.Renaud Foucart, Senior Lecturer in Economics, Lancaster University Management School, Lancaster UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1971862023-01-18T18:31:56Z2023-01-18T18:31:56ZWhy your company needs an innovation strategy in 2023<figure><img src="https://images.theconversation.com/files/505196/original/file-20230118-8082-ogudaj.jpg?ixlib=rb-1.1.0&rect=214%2C0%2C6654%2C4392&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">An innovation strategy is a requirement for companies that want to be successful in the dynamic post-pandemic market.</span> <span class="attribution"><span class="source">(Shutterstock)</span></span></figcaption></figure><iframe style="width: 100%; height: 100px; border: none; position: relative; z-index: 1;" allowtransparency="" allow="clipboard-read; clipboard-write" src="https://narrations.ad-auris.com/widget/the-conversation-canada/why-your-company-needs-an-innovation-strategy-in-2023" width="100%" height="400"></iframe>
<p>Almost a decade ago, Harvard Business School professor Gary Pisano famously wrote that <a href="https://hbr.org/2015/06/you-need-an-innovation-strategy">companies should consider creating an innovation strategy</a>. Today, an innovation strategy is not just an optional nice thing to have — it’s a requirement for companies that want to be successful.</p>
<p>With <a href="https://www.cbc.ca/news/business/inflation-canada-1.6693441">significant post-pandemic inflation</a> and interest rates climbing to new highs, the <a href="https://www.forbes.com/sites/siladityaray/2022/11/17/jpmorgan-forecasts-mild-recession-in-2023--heres-what-major-financial-institutions-predicted-this-week/?sh=19296fe98011">big banks are warning of a recession in 2023</a>. </p>
<p>This, coupled with the longstanding impacts of intense <a href="https://www.weforum.org/agenda/2019/08/globalization-is-changing-your-business-must-become-agile-too-heres-how/">global competition</a>, <a href="https://www.entrepreneur.com/leadership/getting-fickle-consumers-to-buy-into-your-brand/232060">fickle consumers</a>, <a href="https://www.cnbc.com/2022/12/22/data-privacy-rules-are-sweeping-across-the-globe-and-getting-stricter.html">rigorous regulation</a>, <a href="https://www.cpacanada.ca/en/business-and-accounting-resources/financial-and-non-financial-reporting/sustainability-environmental-and-social-reporting/publications/business-impact-of-environmental-social-issues">environmental degradation</a> and <a href="https://doi.org/10.1016/j.techfore.2017.09.033">disruptive technologies</a>, has companies looking to make the most of these uncertain times. An innovation strategy is exactly how companies can accomplish this.</p>
<p>As innovation management researchers, we were curious about how an innovation strategy could impact corporate performance and, ultimately, economic progress. To answer these questions, we collaborated with <a href="https://innovationone.io/"><em>InnovationOne</em></a>, a San Francisco-based innovation consulting firm, to conduct <a href="https://doi.org/10.1016/j.techfore.2022.122257">one of the largest innovation management research studies to date</a>.</p>
<h2>Global innovation study</h2>
<p>Our global study of 1,265 companies, published in <a href="https://www.sciencedirect.com/journal/technological-forecasting-and-social-change"><em>Technological Forecasting & Social Change</em></a>, explored the similarities between companies with an innovation strategy, the impact of an innovation strategy on corporate performance and how companies can improve their nation’s economic progress via innovation. </p>
<p>Similar to <a href="https://doi.org/10.1108/JBS-09-2022-0168">our other research about business innovation agendas</a>, we found that companies with an innovation strategy had leaders committed to innovation, resources specifically dedicated to innovation, knowledge management systems that promoted learning and processes dedicated to taking new ideas to market. </p>
<p>Not surprisingly, companies with an innovation strategy were better equipped to implement value-added practices. Value-added practices include the implementation of <a href="https://doi.org/10.1016/j.apmrv.2021.06.005">novel methodologies and technologies to enhance firm performance</a>. </p>
<h2>Companies with an innovation strategy</h2>
<p>Our data showed that an innovation strategy served as the necessary building block for successful engagement in practices such as big data analytics, open innovation and scientific discovery. </p>
<p>Collecting, interpreting and acting on large data was something that companies with an innovation strategy excelled at. This was likely due to their sophisticated knowledge management systems. Being able to work with large amounts of data allows knowledge to be shared throughout the company, creating better products, services and outcomes for customers.</p>
<p>Open innovation — collaborating on innovations with external partners — was also a trait of companies with an innovation strategy. This was likely a result of their innovation processes, which often involved collaborations.</p>
<figure class="align-center ">
<img alt="A group of people looking at a series of graphs projected on a screen" src="https://images.theconversation.com/files/504778/original/file-20230116-16237-yajc4p.jpg?ixlib=rb-1.1.0&rect=160%2C0%2C4529%2C2874&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/504778/original/file-20230116-16237-yajc4p.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=338&fit=crop&dpr=1 600w, https://images.theconversation.com/files/504778/original/file-20230116-16237-yajc4p.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=338&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/504778/original/file-20230116-16237-yajc4p.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=338&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/504778/original/file-20230116-16237-yajc4p.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=424&fit=crop&dpr=1 754w, https://images.theconversation.com/files/504778/original/file-20230116-16237-yajc4p.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=424&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/504778/original/file-20230116-16237-yajc4p.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=424&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Data analytics allows knowledge to be shared throughout a company, creating better products, services and outcomes for customers.</span>
<span class="attribution"><span class="source">(Shutterstock)</span></span>
</figcaption>
</figure>
<p>New scientific discoveries were also more common among companies with an innovation strategy. All innovation strategy elements — <a href="https://doi.org/10.1080/08956308.2022.2032973">leadership, resources, knowledge management and processes</a> — were found to increase the likelihood of new discoveries. In addition to these practices, innovation strategies enhanced overall corporate performance. </p>
<p>We also found that the link between innovation strategy and corporate performance was strong, regardless of companies’ age, size and location. In other words, an innovation strategy has universal importance for companies. In addition to its corporate benefits, an innovation strategy also resulted in larger economic benefits for the companies.</p>
<h2>Economic benefits of innovation strategy</h2>
<p>Perhaps the most interesting finding of our study is that economic growth of countries was linked to companies’ innovation strategies. These results are largely congruent with the reputed <a href="https://www.wipo.int/global_innovation_index/en/">Global Innovation Index</a>, a benchmark for identifying innovation trends.</p>
<p>We found that countries with high gross domestic product (GDP) — <a href="https://www.imf.org/en/Publications/fandd/issues/Series/Back-to-Basics/gross-domestic-product-GDP">the standard measure of economic progress</a> — had more companies with innovation strategies. Countries with some of the highest global GDPs, like the United States, the UK and Germany, also had the greatest corporate commitments to innovation strategy. </p>
<p>Furthermore, positive economic impacts were not limited to high-income economies, as the “<a href="https://www.wipo.int/publications/en/details.jsp?id=4560">innovation overachiever</a>” India was comprised of firms exhibiting an innovation strategy. This is particularly noteworthy, as collectively, companies can enhance their country’s economic progress by creating and implementing innovation strategies. </p>
<h2>How companies can get started</h2>
<p>Our research is a continuation and update to Pisano’s work. For companies that already have an innovation strategy, we recommend they stay the course or even strengthen commitments. For companies without an innovation strategy, now is the time to get to work and implement one. </p>
<figure class="align-center ">
<img alt="Three people huddle around laptop screen, deep in discussion." src="https://images.theconversation.com/files/505195/original/file-20230118-9302-pkokqj.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/505195/original/file-20230118-9302-pkokqj.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=338&fit=crop&dpr=1 600w, https://images.theconversation.com/files/505195/original/file-20230118-9302-pkokqj.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=338&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/505195/original/file-20230118-9302-pkokqj.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=338&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/505195/original/file-20230118-9302-pkokqj.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=424&fit=crop&dpr=1 754w, https://images.theconversation.com/files/505195/original/file-20230118-9302-pkokqj.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=424&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/505195/original/file-20230118-9302-pkokqj.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=424&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Executives should ensure all employees understand and engage in a company’s innovation strategy.</span>
<span class="attribution"><span class="source">(Shutterstock)</span></span>
</figcaption>
</figure>
<p>To improve competitiveness and performance, executives should make innovation an integrated strategic priority by dedicating resources to innovation, creating knowledge management systems to communicate information regarding innovations, and implementing processes to track innovation progress. </p>
<p>It is crucial that all employees understand and engage in the innovation strategy. Comprehensive understanding and engagement <a href="https://doi.org/10.1108/13632540110806668">yields better ideas, fosters buy-in</a>, and eases implementation while integrating innovation across departments and individuals. Executives should draft an innovation strategy, communicate it to all employees and collaborate on its execution. </p>
<p>An innovation strategy allows companies to better implement novel practices, like big data analytics, as they become better resourced, monitored and managed. These practices are a part of an integrated innovation strategy by providing direct benefits to companies as they engender firm performance in the <a href="https://www.weforum.org/agenda/2021/01/building-resilience-in-the-face-of-dynamic-disruption/">dynamic post-pandemic market</a>.</p><img src="https://counter.theconversation.com/content/197186/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Grant Alexander Wilson has consulted for InnovationOne. </span></em></p><p class="fine-print"><em><span>Tyler Case has consulted for InnovationOne.</span></em></p>To improve firm performance and promote fiscal economic growth, corporations should strengthen and implement an innovation strategy.Grant Alexander Wilson, Assistant Professor, Hill and Levene Schools of Business, University of ReginaTyler Case, Assistant Professor, Edwards School of Business, University of SaskatchewanLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1972742023-01-17T18:29:25Z2023-01-17T18:29:25ZHow large corporations make huge profits from hidden markups at the expense of consumers<figure><img src="https://images.theconversation.com/files/504501/original/file-20230113-24-tyvddw.jpg?ixlib=rb-1.1.0&rect=1374%2C151%2C4948%2C3734&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Abnormally high market prices funnel wealth from consumers to owners of large companies.</span> <span class="attribution"><span class="source">(AP Photo/Julia Nikhinson)</span></span></figcaption></figure><iframe style="width: 100%; height: 100px; border: none; position: relative; z-index: 1;" allowtransparency="" allow="clipboard-read; clipboard-write" src="https://narrations.ad-auris.com/widget/the-conversation-canada/how-large-corporations-make-huge-profits-from-hidden-markups-at-the-expense-of-consumers" width="100%" height="400"></iframe>
<p>Inflation, followed by poverty and social inequality are <a href="https://www.ipsos.com/en/what-worries-world-june-2022">the most pressing issues</a> worrying people around the world right now. Canada has not been immune from the rising cost of living and is still fighting an <a href="https://www.bankofcanada.ca/rates/indicators/key-variables/key-inflation-indicators-and-the-target-range/">inflation rate above the two per cent target</a> preferred by the Bank of Canada.</p>
<p>Canada’s inflation rate <a href="https://globalnews.ca/news/9397165/inflation-canada-out-of-pocket/">hit 8.1 per cent in June</a> — the highest it had been in over 40 years. While the rate has dropped slightly afterwards, it was still <a href="https://www.cbc.ca/news/business/inflation-canada-1.6693441">6.8 per cent in November</a>, easing to <a href="https://www.theglobeandmail.com/business/article-canada-inflation-statscan-cpi-december/">6.3 per cent in December</a>. </p>
<p>High prices funnel wealth from consumers to owners of large companies and <a href="https://policyalternatives.ca/sites/default/files/uploads/publications/National%20Office/2023/01/2022-breakfast-of-champions.pdf">widen the wage gap between CEOs and workers</a>. <a href="https://www.athensjournals.gr/business/2021-4433-AJBE-ECO-Colonescu-03.pdf">My research</a> shows consumer prices are higher than they should be. This is even without considering inflation, because of a less studied phenomenon: compound markup.</p>
<h2>Less competition than you think</h2>
<p>Many economists rely on philosopher <a href="https://www.adamsmith.org/about-adam-smith">Adam Smith’s</a> metaphor of the <a href="https://www.econlib.org/library/Smith/smWN.html?chapter_num=27#book-reader">invisible hand</a> to understand how the market economy works. According to Smith, the invisible hand is the natural force that drives individuals to unknowingly make economic decisions that are best for society. </p>
<p>This economic philosophy maintains the view that competition is ubiquitous in market economies such as North America and western Europe. Competition makes producers undercut other producers’ prices until prices become low enough to just compensate producers for their costs and time. </p>
<figure class="align-center ">
<img alt="A statue of a man in Victorian clothing and a powdered wig standing on a pedestal in front an ornate building" src="https://images.theconversation.com/files/504493/original/file-20230113-23-imu2t5.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/504493/original/file-20230113-23-imu2t5.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/504493/original/file-20230113-23-imu2t5.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/504493/original/file-20230113-23-imu2t5.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/504493/original/file-20230113-23-imu2t5.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/504493/original/file-20230113-23-imu2t5.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/504493/original/file-20230113-23-imu2t5.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Statue of Scottish economist and philosopher Adam Smith on the Royal Mile in Edinburgh, Scotland.</span>
<span class="attribution"><span class="source">(Shutterstock)</span></span>
</figcaption>
</figure>
<p>But, <a href="https://www.athensjournals.gr/business/2021-4433-AJBE-ECO-Colonescu-03.pdf">as my research shows</a>, low prices are the exception, rather than the rule. Such news should surprise <a href="https://fortune.com/2014/08/13/invisible-hand-american-economy/">those who believe in the power of the invisible hand</a> to bring prices down to their lowest possible level.</p>
<p>While still advocating for the principles of free market, including for the invisible hand, Adam Smith <a href="https://www.ibiblio.org/ml/libri/s/SmithA_WealthNations_p.pdf">was aware that monopolies</a>, which would prevent competition and inflate product prices, could emerge. </p>
<h2>Prices much higher than production costs</h2>
<p>The concept of markup, which is how many times a price is higher than the cost of production, is not new. <a href="https://ised-isde.canada.ca/site/competition-bureau-canada/en">Government organizations dedicated to watching the markets</a> already exist to prevent large companies from conspiring against consumers by artificially maintaining high prices.</p>
<p>Economic literature considers only one product at a time or a few slightly differentiated products, such as Adidas and Nike, when measuring markups. Existing theories and estimations ignore that <a href="https://www.athensjournals.gr/business/2021-4433-AJBE-ECO-Colonescu-03.pdf">markups multiply when raw materials, ingredients and components travel</a> from one company to another down the production chain. </p>
<p>A company sells an overpriced component to a second company, that second company incorporates it into their yet unfinished product, then sells it at a profit to a third company, and so on. By the time the finished product reaches the consumer, its price has been successively inflated several times. </p>
<figure class="align-center ">
<img alt="A gloved hand reaches into a bakery display case to pick up a bread bun from a pile" src="https://images.theconversation.com/files/504495/original/file-20230113-12-iahg9z.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/504495/original/file-20230113-12-iahg9z.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=410&fit=crop&dpr=1 600w, https://images.theconversation.com/files/504495/original/file-20230113-12-iahg9z.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=410&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/504495/original/file-20230113-12-iahg9z.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=410&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/504495/original/file-20230113-12-iahg9z.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=516&fit=crop&dpr=1 754w, https://images.theconversation.com/files/504495/original/file-20230113-12-iahg9z.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=516&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/504495/original/file-20230113-12-iahg9z.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=516&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Each extra step in the bread production process adds another layer of profit to the final product’s price — hence, the compound markup.</span>
<span class="attribution"><span class="source">(AP Photo/Michael Probst)</span></span>
</figcaption>
</figure>
<p>Take the bread market. My research implies that the price of bread includes substantial profit margins that go to a handful of large corporations. To produce bread, one needs wheat, which is also sold in competitive markets because all wheat is the same and there are many wheat producers.</p>
<p>To produce wheat, however, one needs fertilizers, mostly sold in <a href="https://www.fas.usda.gov/data/impacts-and-repercussions-price-increases-global-fertilizer-market">highly non-competitive markets</a> by large corporations such as <a href="https://www.statista.com/statistics/1290764/leading-fertilizer-companies-worldwide-market-capitalization/">Nutrien Ltd.</a>, <a href="https://www.statista.com/statistics/461428/revenue-of-major-farm-machinery-manufacturers-worldwide/">heavy machinery</a> sold by large corporations such as <a href="https://www.britannica.com/topic/Deere-and-Company">John Deere</a>, <a href="https://www.statista.com/statistics/257489/ranking-of-leading-agrochemical-companies-worldwide-by-revenue/">pesticides</a>, seeds and other inputs from markets dominated by large corporations. </p>
<p>Tractors need computer chips, steel, aluminium and tires that also come from large corporations. Batteries <a href="https://www.statista.com/statistics/270277/mining-of-rare-earths-by-country/">need rare earth elements</a>, which come from just a few world producers. Each extra step in the production chain adds another layer of profit to the final product’s price — hence, the compound markup. </p>
<h2>Consumer price markups are abnormally high</h2>
<p>To determine the markups of different industries compared to the costs of production, I compared the market price of products with the “natural” cost of production. This natural cost is neighbourhood-specific and takes into account the average cost of rent, profits and wages for certain areas. </p>
<p>My notion of compound markup compares market prices to this concept of natural cost, because a fair price would equal this cost in a monopoly-free economy.</p>
<p>To do this, I measured the overpricing of complex final products such as electronics and transportation services, considering all the overpriced components that the final product incorporates. For data, I used <a href="https://www.oecd.org/sti/ind/input-outputtables.htm">input-output tables</a>, which give flows of sales of intermediate goods from one industry to another. The results of this calculation are the compound markups. </p>
<p>A compound markup of three means the price of the final product is three times greater than the natural cost, considering all the intermediate phases. In contrast, the conventional markup only considers the last phase of production, where the finished good is assembled and sold to a consumer.</p>
<figure class="align-center ">
<img alt="A table that shows compound markups are substantially greater than the conventional cost of production" src="https://images.theconversation.com/files/503157/original/file-20230104-130036-dqkr7.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/503157/original/file-20230104-130036-dqkr7.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=355&fit=crop&dpr=1 600w, https://images.theconversation.com/files/503157/original/file-20230104-130036-dqkr7.JPG?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=355&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/503157/original/file-20230104-130036-dqkr7.JPG?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=355&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/503157/original/file-20230104-130036-dqkr7.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=446&fit=crop&dpr=1 754w, https://images.theconversation.com/files/503157/original/file-20230104-130036-dqkr7.JPG?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=446&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/503157/original/file-20230104-130036-dqkr7.JPG?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=446&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Table showing compound markups compared to conventional markups in a few industries. The compound markups are substantially greater than the conventional ones.</span>
<span class="attribution"><span class="source">(Constantin Colonescu)</span>, <span class="license">Author provided</span></span>
</figcaption>
</figure>
<p>These results indicate that prices are, for many of the goods and services we all need, up to five times higher than the natural costs of production. The owners of large corporations make abnormally high profits at the expense of consumers. </p>
<h2>Re-thinking market competition</h2>
<p>An invisible hand is indeed at work in the supermarket, but it is one that Adam Smith would not recognize. The real invisible hand is there to benefit the producer, not the consumer, contrary to Smith’s belief. <a href="https://wfto.com/news/fair-trade-movement-all">Concerned groups have identified fair trade</a> as a goal in international markets for years, but not so much in our daily lives and not in the context of compound pricing. </p>
<p>Governments, consumers and consumer organizations could use research like this to promote more competition in markets, advocate fair trade within a country and re-think income inequality policies. </p>
<p>Large corporations tend to monopolize intermediate markets even more than they do in final goods markets. Because of this, antitrust government agencies <a href="https://ised-isde.canada.ca/site/competition-bureau-canada/en">like Canada’s Competition Bureau</a> should supervise markets for intermediate goods such as fertilizers, agricultural machinery and rare earth elements — not just the markets for final consumer goods.</p><img src="https://counter.theconversation.com/content/197274/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Constantin Colonescu does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Prices are up to five times higher than the raw costs of production for many of the goods and services we all need.Constantin Colonescu, Associate Professor of Economics, MacEwan UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1916352022-11-21T13:15:25Z2022-11-21T13:15:25ZHow to design clean energy subsidies that work – without wasting money on free riders<figure><img src="https://images.theconversation.com/files/495284/original/file-20221115-12-i6n3tg.jpg?ixlib=rb-1.1.0&rect=0%2C32%2C5464%2C3599&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">How long should a solar subsidies, or any subsidy, last?</span> <span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/photo/aerial-view-of-electric-car-parking-in-charging-royalty-free-image/1390861566">Artur Debat/Moment via Getty Images</a></span></figcaption></figure><p>The planet is heating up as greenhouse gas emissions rise, contributing to <a href="https://theconversation.com/if-you-thought-this-summers-heat-waves-were-bad-a-new-study-has-some-disturbing-news-about-dangerous-heat-in-the-future-189370">extreme heat waves</a> and <a href="https://news.climate.columbia.edu/2022/09/12/the-flood-seen-from-space-pakistans-apocalyptic-crisis/">once-unimaginable</a> <a href="https://www.science.org/content/article/europe-s-deadly-floods-leave-scientists-stunned">flooding</a>. Yet despite the risks, countries’ policies are <a href="https://www.unep.org/resources/emissions-gap-report-2022">not on</a> <a href="https://unfccc.int/news/climate-plans-remain-insufficient-more-ambitious-action-needed-now">track</a> to keep global warming in check.</p>
<p>The problem isn’t a lack of technology. The International Energy Agency recently released a detailed analysis of the <a href="https://www.iea.org/reports/world-energy-outlook-2022/executive-summary">clean energy technology needed</a> to lower greenhouse gas emissions to net zero globally by 2050. What’s needed, the IEA says, is significant government support to boost solar and wind power, electric vehicles, heat pumps and a variety of other technologies for a rapid energy transition.</p>
<p>One politically popular tool for providing that government support is the subsidy. The U.S. government’s new <a href="https://www.congress.gov/bill/117th-congress/house-bill/5376/text">Inflation Reduction Act</a> is a <a href="https://www.mckinsey.com/industries/public-and-social-sector/our-insights/the-inflation-reduction-act-heres-whats-in-it">multibillion-dollar example</a>, packed with financial incentives to encourage people to buy electric vehicles, solar panels and more. </p>
<p>But just how big do governments’ clean energy subsidies need to be to meet their goals, and how long are they needed?</p>
<p>Our research points to three important answers for any government considering clean energy subsidies – and for citizens keeping an eye on their progress.</p>
<h2>Why subsidize at all?</h2>
<p>An obvious first question is: Why should governments subsidize clean energy at all?</p>
<p>The most direct answer is that <a href="https://rhg.com/research/climate-clean-energy-inflation-reduction-act/">clean energy helps to reduce harmful emissions</a> – both of gases that cause local pollution and of those that warm the planet.</p>
<p>Reducing emissions helps to lower both public health costs and damage from climate change, which justifies government spending. Reports have estimated that the U.S. <a href="https://www.nrdc.org/sites/default/files/costs-inaction-burden-health-report.pdf">spends US$820 billion</a> a year just on health costs associated with air pollution and climate change. Globally, the World Health Organization estimated that the costs reached <a href="https://www.who.int/news/item/05-12-2018-health-benefits-far-outweigh-the-costs-of-meeting-climate-change-goals">$5.1 trillion</a> in 2018. Taxing and regulating polluting industries can also cut emissions, but carrots are often more politically popular than sticks.</p>
<figure class="align-center ">
<img alt="A female scientist holds a solar cell between tweezers" src="https://images.theconversation.com/files/494319/original/file-20221109-8958-sqcdrx.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/494319/original/file-20221109-8958-sqcdrx.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/494319/original/file-20221109-8958-sqcdrx.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/494319/original/file-20221109-8958-sqcdrx.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/494319/original/file-20221109-8958-sqcdrx.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/494319/original/file-20221109-8958-sqcdrx.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/494319/original/file-20221109-8958-sqcdrx.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Subsidies helped launch the solar industry. Buyers today can get a 30% tax credit for home solar installations.</span>
<span class="attribution"><a class="source" href="https://images.nrel.gov/MX/Profiles/en/default/#/main/gallery/2e49a09c-181d-4712-8d08-4751fa1c25e3">Joe DelNero/NREL</a></span>
</figcaption>
</figure>
<p>A less obvious reason for subsidies is that government support can help a new and initially expensive technology become competitive in the market.</p>
<p>Governments have been central to the development of many technologies that are pervasive today, including microchips, the internet, solar panels and GPS. Microchips were <a href="https://slate.com/culture/2009/06/1959-when-america-first-met-the-microchip.html">fantastically expensive</a> when first developed in the 1950s. Demand from the U.S. military and NASA, which could pay the high price, fueled the growth of the industry, and costs eventually dropped enough that they’re now found in everything from cars to toasters.</p>
<p>Government <a href="https://www.seia.org/initiatives/solar-investment-tax-credit-itc">support</a> has also helped to bring down the cost of solar power. Rooftop solar system costs <a href="https://www.nrel.gov/news/program/2021/documenting-a-decade-of-cost-declines-for-pv-systems.html">fell 64%</a> from 2010 to 2020 in the U.S. because cells became more efficient and higher volumes drove prices down.</p>
<h2>How much money?</h2>
<p>So, subsidies can work, but what’s the right amount?</p>
<p>Too low, and a subsidy has no effect. Giving everyone a coupon for $1 off an electric car won’t change anyone’s buying plans. But subsidies can also be set too high. </p>
<p>The government doesn’t need to spend money persuading consumers who already plan to buy an electric car and can afford one, yet studies show clean energy subsidies disproportionately go to <a href="https://doi.org/10.1086/685597">richer people</a>. When people who would have purchased the item anyway receive subsidies, they’re known as “<a href="https://www.jstor.org/stable/44075502">free riders</a>.”</p>
<p>The ideal subsidy attracts new buyers while avoiding free riders and overspending on people who are already convinced. The subsidy can only work when it convinces a previously uninterested consumer to buy a product.</p>
<figure class="align-center ">
<img alt="Chart shows costs falling as solar purchases rise." src="https://images.theconversation.com/files/492859/original/file-20221101-12-2r06ux.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/492859/original/file-20221101-12-2r06ux.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=417&fit=crop&dpr=1 600w, https://images.theconversation.com/files/492859/original/file-20221101-12-2r06ux.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=417&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/492859/original/file-20221101-12-2r06ux.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=417&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/492859/original/file-20221101-12-2r06ux.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=524&fit=crop&dpr=1 754w, https://images.theconversation.com/files/492859/original/file-20221101-12-2r06ux.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=524&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/492859/original/file-20221101-12-2r06ux.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=524&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Between 2009 and 2017, solar prices fell 50% and solar purchases increased tenfold with the help of subsidies. Lower cost makes a technology more attractive, while a growing solar industry is able to produce panels at lower cost.</span>
<span class="attribution"><a class="source" href="https://doi.org/10.2172/1820126">Barbose et al., 2021; Solar Market Insight Report/SEIA</a></span>
</figcaption>
</figure>
<h2>How long should subsidies last?</h2>
<p>Timing is also important when thinking about the size of subsidies. When a promising technology is new and expensive, free riders are less of an issue. A large subsidy may be needed to attract even a few buyers, build out the emerging market and support the industry’s growth. </p>
<p>Solar power is a good example: In 2005, solar was several times more expensive than traditional electricity sources. Subsidies, like the 30% <a href="https://www.seia.org/sites/default/files/resources/History%20of%20ITC%20Slides.pdf">Investment Tax Credit</a> established that year, helped lower the cost, and today’s solar is <a href="https://ourworldindata.org/grapher/solar-pv-prices">about one-tenth the price</a> and <a href="https://ourworldindata.org/grapher/levelized-cost-of-energy">cost-competitive</a> with other electricity sources.</p>
<p>Once a clean technology is competitive, subsidies can still play an important role in speeding up the energy transition, but at a lower level than in the past.</p>
<p>In <a href="https://doi.org/10.1016/j.enpol.2021.112326">our research</a> on residential solar panels, we estimate that the ideal subsidy for rooftop solar should have been initially higher than the actual <a href="https://www.energy.gov/eere/solar/homeowners-guide-federal-tax-credit-solar-photovoltaics">federal tax credit</a> but fall more quickly, declining to zero after 14 years from its start date. </p>
<p>By starting the subsidy about 20% higher, our models found that it would have boosted production faster, which would cut costs faster and reduce the need for high future subsidies. </p>
<h2>Should subsidies eventually disappear?</h2>
<p>It makes sense for subsidies to disappear altogether once a technology is sufficiently cost-competitive. However, even if a technology is competitive, it might be worth further subsidy if the speed of adoption is important. </p>
<p>The argument for continuing a subsidy depends on whether the additional adoption it stimulates is cost-effective in reducing emissions. Wind power is cheaper than fossil fuel power in many parts of the country. Even so, we <a href="https://doi.org/10.1016/j.techfore.2022.121840">found</a> that continuing subsidies for wind power would lead to valuable emission benefits. </p>
<p>That said, sometimes subsidies stick around when they shouldn’t. </p>
<p>Fossil fuels have been heavily subsidized for decades, despite their harm to human health, the environment and the climate, all of which raise public costs. Governments globally spent <a href="https://www.iisd.org/system/files/2022-08/background-note-fossil-fuel-subsidy-reform.pdf">almost $700 billion</a> on fossil fuel subsidies in 2021. The U.S. government, in recent years, has spent more on renewable energy tax credits than <a href="https://www.cbo.gov/system/files/115th-congress-2017-2018/reports/52521-energytestimony.pdf">fossil fuels, which is a promising transition of government support</a>.</p>
<h2>Global impact</h2>
<p>While the U.S. was the <a href="https://doi.org/10.1016/j.enpol.2021.112326">focus of our solar subsidy research</a>, this way of thinking – balancing the costs and benefits of subsidies – can be applied in other nations to design better subsidies for clean energy technologies. </p>
<p>The subsidy is just one policy tool, but it is an important one for both stimulating early-stage technologies and accelerating deployment of more competitive options. As the world attempts the fastest energy transition in history, today’s energy subsidy decisions will affect its ability to succeed.</p><img src="https://counter.theconversation.com/content/191635/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Eric Hittinger receives funding from the U.S. National Science Foundation. He is affiliated with with the U.S. Association for Energy Economics.</span></em></p><p class="fine-print"><em><span>Eric Williams receives funding from the U.S. National Science Foundation.</span></em></p><p class="fine-print"><em><span>Qing Miao receives funding from NSF. </span></em></p><p class="fine-print"><em><span>Tiruwork B. Tibebu receives funding from NSF. </span></em></p>Start high, drop fast and avoid the free-riders: How to design subsidies that can boost clean energy in the US and elsewhere.Eric Hittinger, Associate Professor of Public Policy, Rochester Institute of TechnologyEric Williams, Professor of Sustainability, Rochester Institute of TechnologyQing Miao, Associate Professor of Public Policy, Rochester Institute of TechnologyTiruwork B. Tibebu, Ph.D. Student, Rochester Institute of TechnologyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1873732022-07-28T14:38:02Z2022-07-28T14:38:02ZZambia can meet growing food demand: how to fix what’s standing in its way<figure><img src="https://images.theconversation.com/files/475418/original/file-20220721-10361-ayd9br.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Lorries blocked at the border between DRC and Zambia. Poor roads are a major stumbling block to trade.</span> <span class="attribution"><span class="source">Lucien Kahozi/AFP via Getty Images)</span></span></figcaption></figure><p>African countries face great challenges in adapting to climate change to meet growing demand for food. The current <a href="https://www.weforum.org/agenda/2022/07/africa-drought-food-starvation/">drought in East Africa</a> is the latest manifestation of changing weather patterns.</p>
<p>But countries such as Zambia, where there is <a href="https://www.ifad.org/en/web/operations/w/country/zambia">good land and water</a>, have major opportunities to meet food demand by growing agriculture exports and processing their produce. Zambian farmers can earn substantial returns from increased production. Their production can also alleviate the pressures in countries such as Kenya.</p>
<p>To realise these opportunities, Zambian products have to reach export markets at good prices. For this, Zambia needs competitive cross-border markets and efficient transport and logistics services. However, regional grain and oilseeds trade is not working for producers in Zambia or for buyers in East Africa, with huge variances in agricultural commodity prices in Kenya and in Zambia.</p>
<p><a href="https://static1.squarespace.com/static/52246331e4b0a46e5f1b8ce5/t/627b83c72818b8346e9227a0/1652261854313/WP+Assessing+agriculture+food+markets+in+Eastern+and+Southern+Africa+an+agenda+for+regional+competition+enforcement.pdf">Our reality check</a> on the workings of cross-border markets points to regional integration being the key to unlocking massive potential for Zambia to anchor sustainable agricultural growth in Africa. But effective regional integration remains a dream, undermining Zambia’s potential. </p>
<h2>How are markets really working for Zambia?</h2>
<p><a href="https://www.researchgate.net/publication/341904098_Agriculture_as_a_Determinant_of_Zambian_Economic_Sustainability">Zambian agriculture</a> has been a growth story with expanding net exports in important products such as <a href="https://static1.squarespace.com/static/52246331e4b0a46e5f1b8ce5/t/627b83c72818b8346e9227a0/1652261854313/WP+Assessing+agriculture+food+markets+in+Eastern+and+Southern+Africa+an+agenda+for+regional+competition+enforcement.pdf">soybeans</a>. However, this performance is very short of where it should be. Zambia should be the grain basket for the whole region. Malawi has shown what is possible in <a href="https://static1.squarespace.com/static/52246331e4b0a46e5f1b8ce5/t/620fb231a08ee67644acc686/1645195827213/Price+tracker+9+DRAFT+14022022.pdf">soybeans</a>. It almost doubled production in 2019/2020, to <a href="https://www.fao.org/faostat/en/#data">421,000 tonnes</a>, <a href="https://www.fao.org/faostat/en/#data">more than Zambia</a> in that year.</p>
<p>A major issue is how cross-border markets are working, or not working. <a href="https://www.researchgate.net/publication/335912204_Soya_Beans_Production_in_Zambia_Opportunities_and_Challenges">Zambian suppliers report</a> having substantial volumes of soybeans which can meet the huge regional demand. </p>
<p>Market prices for maize in Nairobi climbed to over <a href="https://static1.squarespace.com/static/52246331e4b0a46e5f1b8ce5/t/62cd4f8496b1364d48c7548e/1657622405695/AMO_Price+tracker+14_12072022.pdf">US$500/Mt in June 2022</a>, reaching similar levels in Kampala, Uganda (Figure 1). In early July, prices were reported to have climbed well above <a href="http://kamis.kilimo.go.ke/">US$750/Mt</a> in Kenya. Meanwhile prices in <a href="https://static1.squarespace.com/static/52246331e4b0a46e5f1b8ce5/t/62cd4f8496b1364d48c7548e/1657622405695/AMO_Price+tracker+14_12072022.pdf">Zambia</a> were around US$220/Mt or 3,700 kwacha/Mt.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/475123/original/file-20220720-24-jxsqfz.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/475123/original/file-20220720-24-jxsqfz.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=402&fit=crop&dpr=1 600w, https://images.theconversation.com/files/475123/original/file-20220720-24-jxsqfz.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=402&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/475123/original/file-20220720-24-jxsqfz.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=402&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/475123/original/file-20220720-24-jxsqfz.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=505&fit=crop&dpr=1 754w, https://images.theconversation.com/files/475123/original/file-20220720-24-jxsqfz.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=505&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/475123/original/file-20220720-24-jxsqfz.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=505&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption"></span>
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<p>Though lower than Kenya’s, Zambian maize prices are still substantially higher than last year’s. This is in line with <a href="https://www.sagis.org.za/swb_2022.html">global trends</a>. With higher input costs, farmers need higher output prices to incentivise production.</p>
<p>The gap between prices in Zambia and those in Nairobi and Kampala is close to US$300/Mt. This is double what would be explained by the efficient cost of transporting maize from Zambia to these countries. Efficient transport costs take account of reasonable trucking, logistics and border costs.</p>
<p>Even with the higher fuel costs, grain should cost around US$150/Mt to be transported from Lusaka to Kampala and Nairobi. Of course, quoted transport rates may be much higher, but this reflects the many problems in cross-border transport which need to be addressed.</p>
<p>The situation is even more extreme in soybeans, which are a much higher value commodity. Zambia’s bumper soybean harvest in 2022 was being sold at prices around US$550/Mt in June, with prices even being quoted as low as US$439/Mt at the end of the month. Prices in East Africa were well over US$1,000/Mt, some US$500-700/Mt above those in Zambia. This is three to four times the transport costs. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/475124/original/file-20220720-9522-pk6d40.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/475124/original/file-20220720-9522-pk6d40.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=438&fit=crop&dpr=1 600w, https://images.theconversation.com/files/475124/original/file-20220720-9522-pk6d40.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=438&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/475124/original/file-20220720-9522-pk6d40.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=438&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/475124/original/file-20220720-9522-pk6d40.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=550&fit=crop&dpr=1 754w, https://images.theconversation.com/files/475124/original/file-20220720-9522-pk6d40.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=550&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/475124/original/file-20220720-9522-pk6d40.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=550&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption"></span>
</figcaption>
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<p>In other words, producers in Zambia should be getting more for their crops and buyers in East Africa should be paying less, alleviating the food price spikes there. </p>
<h2>How can this be and what is to be done?</h2>
<p>A combination of factors is undermining the growth of Zambia. </p>
<p>First, reliable market information is required to link buyers and suppliers, and to enable markets to work. In the absence of information, it’s risky to export. This lack of information affects small and medium sized farmers and businesses. Large-scale traders who have operations across the region have an advantage over smaller businesses and farmers because they have private information. </p>
<p>Second, the market players require clear trade policy signals to take advantage of export opportunities. Any hesitation or mixed signals tend to undermine the ability to make deals with confidence. It is therefore important for Zambia’s new government not to impose ad hoc trade restrictions, for example, as the previous government did in August 2021 to restrict maize exports. Such restrictions, imposed and lifted from month to month, mean deals cannot be made with the confidence that they can be fulfilled. </p>
<p>Third, the market opportunities in East Africa require urgent regional co-operation to improve transport corridors on the ground rather than in rhetoric.</p>
<p>Malawian soybean suppliers have shown the value. Small suppliers have already been using the <a href="https://www.competition.org.za/africanmarketobservatory">African Market Observatory data</a> on East African prices in 2022 to negotiate better prices for their exports. This increased realised prices by around <a href="https://static1.squarespace.com/static/52246331e4b0a46e5f1b8ce5/t/62cd4f8496b1364d48c7548e/1657622405695/AMO_Price+tracker+14_12072022.pdf">$200/Mt</a> more than they would otherwise have accepted.</p>
<p>Zambian farmers could reap similar benefits too. This would support a big push in production, enabling Zambian farmers to invest in improved agricultural systems. This is even more essential as next year is likely to be another <a href="https://gro-intelligence.com/insights/la-nina-is-forecast-to-impact-global-agriculture-for-a-third-year-in-a-row">La Niña</a> weather pattern which sees good rains in Zambia and poor rains in parts of East Africa and the Horn of Africa. </p>
<p>The ongoing effects of climate change mean more investment is required to make agriculture resilient. This involves investments in water management, irrigation, storage facilities, advice and information systems. </p>
<p>The vulnerability of the whole of Southern and East Africa as a climate “hotspot” means urgent and coordinated regional action is required. </p>
<p>But Zambia doesn’t have to wait for this action. </p>
<p>It can lead in championing sustainable agricultural growth in the knowledge that this is essential for resilient food supplies across the region. This requires good policies with a longer-term vision. The country needs, without any reservations, to fully back regional integration and competitive regional markets. Excessive margins cannot be captured by connected so-called “middlemen”. </p>
<p>Greater certainty for businesses needs to be accompanied by enforcement of clear rules for company power. Regional competition enforcement by the <a href="https://globalcompetitionreview.com/insight/enforcer-hub/2021/organization-profile/zambia-competition-and-consumer-protection-commission">Competition and Consumer Protection Commission of Zambia</a> together with the <a href="https://www.comesacompetition.org/">COMESA Competition Commission</a> is a key part of fair and competitive markets which work for all.</p>
<p>Investment is required in critical infrastructure such as storage for smaller market participants to use on fair terms. Finance can be mobilised, such as that being made available by the <a href="https://www.afdb.org/en/news-and-events/press-releases/african-development-bank-board-approves-15-billion-facility-avert-food-crisis-51716">African Development Bank</a>.</p>
<p>It is essential to support regional research networks, such as those led by the <a href="https://www.devex.com/organizations/indaba-agricultural-policy-research-institute-iapri-115251">Indaba Agricultural Policy Institute</a> and the <a href="https://www.competition.org.za/africanmarketobservatory">African Market Observatory</a> of the <a href="https://www.competition.org.za/home">Centre for Competition, Regulation and Economic Development</a> and partners.</p><img src="https://counter.theconversation.com/content/187373/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The Centre for Competition, Regulation and Economic Development at the University of Johannesburg has received funding for related work from the COMESA Competition Commission and the South African Department of Trade, Industry and Competition. </span></em></p><p class="fine-print"><em><span>Antony Chapoto and Ntombifuthi Tshabalala do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Producers in Zambia should be getting more for their crops, and buyers in East Africa should be paying less, alleviating food price spikes.Antony Chapoto, Research Director, Indaba Agricultural Policy Research Institute (IAPRI)Ntombifuthi Tshabalala, Economist at Centre for Competition, Regulation and Economic Development, University of JohannesburgSimon Roberts, Professor of Economics and Lead Researcher, Centre for Competition, Regulation and Economic Development, UJ, University of JohannesburgLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1872792022-07-21T05:21:24Z2022-07-21T05:21:24ZANZ’s takeover of Suncorp will reduce bank competition – but will that be enough to block it?<p>Australia has one of the world’s most concentrated banking sectors, with its four biggest banks – Commonwealth Bank, National Australia Bank, Westpac and ANZ – holding more than about three-quarters of the market.</p>
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<a href="https://theconversation.com/four-pillars-or-four-pillows-bankings-comfy-collective-23297">Four pillars or four pillows? Banking's comfy collective</a>
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<p>It will become even more concentrated if ANZ – the “minnow” of the big four – completes its plan to buy the banking division of Queensland-based <a href="https://www.suncorp.com.au/">Suncorp</a> for A$4.9 billion. </p>
<p>Suncorp, which also has a large insurance division, is the second largest of Australia’s four major regional banks. It is a significant brand in Queensland, and known to the rest of Australia through the name of Brisbane’s rugby stadium.</p>
<p>This will be the largest consolidation in Australian banking since 2008, when Commonwealth Bank took over Perth-based Bankwest and Westpac acquired Sydney-based St George Bank. It will push ANZ from fourth to third place by loan value. </p>
<p>First though, it needs two regulatory approvals – from the <a href="https://www.accc.gov.au/">Australian Competition and Consumer Commission</a>, which can block any merger that “substantially lessens” competition in any market; and the federal treasurer, who has <a href="https://www.legislation.gov.au/Details/C2020C00315">specific powers</a> over the financial sector.</p>
<p>Approval is by no means guaranteed. </p>
<p>ANZ’s chief executive Shayne Elliott has argued the deal will “<a href="https://www.suncorpgroup.com.au/announcements-pdf/1684676">improve competition</a>”. But that’s probably true only for ANZ. </p>
<p>Every smaller competitor, and consumers, have good grounds to argue the competition watchdog, or federal treasurer Jim Chalmers, should be vetoing the deal.</p>
<h2>This isn’t 2008</h2>
<p>When the competition watchdog and then federal treasurer Wayne Swan approved the acquisitions of Bankwest and St George in 2008, it was feared the alternative was these banks collapsing in the wake of the global financial crisis.</p>
<p>Bankwest’s owner, the Bank of Scotland, was in dire financial straits (and in 2009 would itself be taken over, by Lloyds Bank). </p>
<p>St George was in trouble, having had to <a href="https://www.afr.com/politics/westpac-swoops-on-st-george-20080513-jkgo1">raise its interest rates</a> more than its rivals because it had borrowed so much money to expand its loans business. </p>
<h2>ANZ’s competition argument</h2>
<p>Suncorp is under no such existential threat. The ANZ chief executive’s argument about why the merger <a href="https://www.suncorpgroup.com.au/announcements-pdf/1684676">is good for competition</a> has instead been based overwhelmingly on what it means to ANZ:</p>
<blockquote>
<p>As the smallest of the major banks, we believe a stronger ANZ will be able to compete more effectively in Queensland offering better outcomes for customers.</p>
</blockquote>
<p>He told the Australian Financial Review: “Just as Suncorp probably feels dwarfed by ANZ, we feel dwarfed by CBA.”</p>
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<p>Absorbing Suncorp’s $45 billion of deposits and $58 billion in commercial and home loans to its books will push up ANZ’s <a href="https://www.apra.gov.au/monthly-authorised-deposit-taking-institution-statistics">share of the home-lending market</a> to about 15.4%, compared with Commonwealth Bank’s 25.9%, Westpac’s 21.5% and NAB’s 14.9%. </p>
<p>But for everyone else, including consumers, other banks and regulators, the deal will likely hinder competition. </p>
<h2>Concentration and competition</h2>
<p>High market concentration does not necessarily mean competition is weak or that community outcomes will be poor, as the Productivity Commission concluded following its <a href="https://www.pc.gov.au/inquiries/completed/financial-system/report">2018 inquiry</a> into the state of competition in Australian financial services. </p>
<blockquote>
<p>Rather, it is the way market participants gain, maintain and use their market power that may lead to poor consumer outcomes. </p>
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<p>However, the Productivity Commission also concluded Australia’s major banks had charged prices above competitive levels, offered inferior quality products, and had acted to inhibit the expansion of smaller competitors. </p>
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<p>All are indicators of the use of market power to the detriment of consumers. </p>
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<p>Bucketloads more evidence has come from the <a href="https://theconversation.com/banking-royal-commissions-damning-report-things-are-so-bad-that-new-laws-might-not-help-104058">banking royal commission</a>, which found evidence that all four big banks (and many other financial services companies) had committed illegal or unethical acts to maximise profits at their customers’ expense.</p>
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<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/what-are-we-teaching-in-business-schools-the-royal-commissions-challenge-to-amoral-theory-110901">What are we teaching in business schools? The royal commission's challenge to amoral theory</a>
</strong>
</em>
</p>
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<h2>Tackling the ‘cosy olipoly’</h2>
<p>Following the publication of the royal commission’s final report in February 2019, the Australian Competition and Consumer Commission’s head, Rod Sims, <a href="https://aacs.org.au/rod-sims-australia-needs-a-law-against-unfair-behaviour-by-companies/">said</a></p>
<blockquote>
<p>A cosy banking oligopoly is surely at the heart of recent problems, so we must and will find ways to get more effective competition in banking.</p>
</blockquote>
<p>This mission is a work in progress. Some hopeful experiments, such as the “neobanks” (pure digital banks) are failing. Australia’s first neobank, Volt, which was granted its license to operate as a authorised deposit-taking institution in 2019, <a href="https://www.reuters.com/business/finance/australias-first-neobank-volt-shut-deposit-taking-business-return-licence-2022-06-29/">collapsed last month</a>. The second neobank, Xinja, quit the banking business back December 2020. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/its-unanimous-economists-poll-says-we-can-fix-the-banks-but-that-doesnt-mean-we-will-111748">It's unanimous: Economists' poll says we can fix the banks. But that doesn't mean we will</a>
</strong>
</em>
</p>
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<p>Given this, it’s hard to argue that further concentration is good for competition. </p>
<p>For the competition watchdog to block the deal, however, it must be convinced of a “<a href="https://www.accc.gov.au/system/files/Merger%20guidelines%20-%20Final.PDF">substantial</a>” lessening of competition. That means ANZ gaining market power to “significantly and sustainably” increase its prices or profit margins.</p>
<p>By my reading this deal will certainly lessen competition – but it’s uncertain if it will do so according to the “substantial” test. </p>
<p>Either way, this will prove a major test for the new chair of the Competition and Consumer Commission <a href="https://theconversation.com/allan-fels-as-accc-chair-gina-cass-gottlieb-will-put-the-public-interest-first-despite-years-of-fighting-for-business-173736">Gina Cass-Gottlieb</a> and new treasurer Jim Chalmers.</p><img src="https://counter.theconversation.com/content/187279/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Angel Zhong does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>There are good grounds to argue the competition watchdog, or federal treasurer Jim Chalmers, should be vetoing the deal.Angel Zhong, Associate Professor of Finance, RMIT UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1861012022-07-19T19:53:24Z2022-07-19T19:53:24ZPush for AI innovation can create dangerous products<figure><img src="https://images.theconversation.com/files/473750/original/file-20220713-16-cnt9m4.jpg?ixlib=rb-1.1.0&rect=0%2C0%2C7488%2C4064&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Companies develop AI to gain an advantage over their competition, but this results in flawed products entering the market.</span> <span class="attribution"><span class="source">(Shutterstock)</span></span></figcaption></figure><iframe style="width: 100%; height: 100px; border: none; position: relative; z-index: 1;" allowtransparency="" allow="clipboard-read; clipboard-write" src="https://narrations.ad-auris.com/widget/the-conversation-canada/push-for-ai-innovation-can-create-dangerous-products" width="100%" height="400"></iframe>
<p>This past June, the U.S. National Highway Traffic Safety Administration announced a <a href="https://fortune.com/2022/06/10/elon-musk-tesla-nhtsa-investigation-traffic-safety-autonomous-fsd-fatal-probe/">probe into Tesla’s</a> autopilot software. Data gathered from 16 crashes raised concerns over the possibility that Tesla’s AI may be programmed to quit when a crash is imminent. This way, the car’s driver, not the manufacturer, would be legally liable at the moment of impact.</p>
<p>It echoes the revelation that Uber’s self-driving car, which hit and killed a woman, detected her six seconds before impact. But the <a href="https://www.wired.com/story/ubers-self-driving-car-didnt-know-pedestrians-could-jaywalk/">AI was not programmed</a> to recognize pedestrians outside of designated crosswalks. Why? Because jaywalkers are not legally there.</p>
<p>Some believe these stories are proof that our concept of liability needs to change. To them, unimpeded continuous innovation and widespread adoption of AI is what our society needs most, which means protecting innovative corporations from lawsuits. But what if, in fact, it’s our <a href="https://utorontopress.com/9781487508425/connected-capitalism/">understanding of competition</a> that needs to evolve instead? </p>
<p>If AI is central to our future, we need to pay careful attention to the assumptions around harms and benefits programmed into these products. As it stands, there is a perverse incentive to design AI that is artificially innocent. </p>
<p>A better approach would involve a more extensive harm-reduction strategy. Maybe we should be encouraging industry-wide collaboration on certain classes of life-saving algorithms, designing them for optimal performance rather than proprietary advantage.</p>
<h2>Every fix creates a new problem</h2>
<p>Some of the loudest and most powerful corporate voices want us to trust machines to solve complex societal problems. AI is hailed as a potential solution for the problems of cross-cultural <a href="https://www.fastcompany.com/90753311/google-is-working-on-language-to-text-ar-glasses-its-a-complicated-idea">communication</a>, <a href="https://www2.deloitte.com/us/en/insights/industry/health-care/ai-led-transformations-in-health-care.html">health care</a> and even <a href="https://www.bloomberg.com/news/articles/2022-06-30/new-algorithm-can-predict-crime-in-us-cities-a-week-before-it-happens">crime</a> and social unrest. </p>
<p>Corporations want us to forget that AI innovations reflect the biases of the programmer. There is a false belief that as long as the product design pitch passes through internal legal and policy constraints, the resulting technology is unlikely to be harmful. But harms emerge in all sorts of unexpected ways, as Uber’s design team learned when their vehicle encountered a jaywalker for the first time.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/googles-algorithms-discriminate-against-women-and-people-of-colour-112516">Google's algorithms discriminate against women and people of colour</a>
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</em>
</p>
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<p>What happens when the nefarious implications of an AI are not immediately recognized? Or when it is too difficult to take the AI offline when necessary? Which is what happened when Boeing hesitated to <a href="https://www.geekwire.com/2022/downfall-documentary-casts-the-tale-of-boeings-737-max-debacle-as-a-tech-tragedy/">ground the 737 Max jets</a> after a programming glitch was found to cause crashes — and 346 people died as a result.</p>
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<iframe width="440" height="260" src="https://www.youtube.com/embed/09nrrEAScec?wmode=transparent&start=0" frameborder="0" allowfullscreen=""></iframe>
<figcaption><span class="caption">In 2019, Boeing admitted that its software was the cause of two deadly crashes.</span></figcaption>
</figure>
<p>We must constantly reframe technological discussions in moral terms. The work of technology demands discrete, explicit instructions. Wherever there is no specific moral consensus, individuals simply doing their job will make a call, often without taking the time to consider the full consequences of their actions.</p>
<h2>Moving beyond liability</h2>
<p>At most tech companies, a proposal for a product would be reviewed by an in-house legal team. It would draw attention to the policies the design folks need to consider in their programming. These policies might relate to what data is consumed, where the data comes from, what data is stored or how it is used (for example anonymized, aggregated or filtered). The legal team’s primary concern would be liability, not ethics or social perceptions.</p>
<p>Research has called for taking an approach that considers <a href="https://hbr.org/2021/07/to-spur-growth-in-ai-we-need-a-new-approach-to-legal-liability">insurance and indemnity (responsibility for loss compensation)</a> to shift liability and allow stakeholders to negotiate directly with each other. They also propose moving disputes over algorithms to specialized tribunals. But we need bolder thinking to address these challenges.</p>
<p>Instead of liability, a focus on harm reduction would be more helpful. Unfortunately, our current system doesn’t allow companies to easily co-operate or share knowledge, especially when anti-trust concerns might be raised. This has to change.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/473751/original/file-20220713-26-prkevj.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="steering wheel and display screen in the interior of a vehicle" src="https://images.theconversation.com/files/473751/original/file-20220713-26-prkevj.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/473751/original/file-20220713-26-prkevj.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=337&fit=crop&dpr=1 600w, https://images.theconversation.com/files/473751/original/file-20220713-26-prkevj.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=337&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/473751/original/file-20220713-26-prkevj.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=337&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/473751/original/file-20220713-26-prkevj.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=424&fit=crop&dpr=1 754w, https://images.theconversation.com/files/473751/original/file-20220713-26-prkevj.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=424&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/473751/original/file-20220713-26-prkevj.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=424&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">An investigation by the National Highway Traffic Safety Administration found that Tesla’s autopilot function turned off in advance of an imminent collision.</span>
<span class="attribution"><span class="source">(Shutterstock)</span></span>
</figcaption>
</figure>
<h2>Re-thinking the limits of competition</h2>
<p>These problems demand large-scale, industry-wide efforts. The misguided pressures of competition pushed Tesla, Uber and Boeing to release their AI too soon. They were overly concerned with the costs of legal liability and lagging behind competitors. </p>
<p>My research proposes the somewhat counter-intuitive idea that the ethical positions a corporation takes should be a source of competitive parity in its industry, not a competitive advantage. In other words, a company should not stand out for finding ethical ways to run its business. Ethical commitments should be the minimum expectation required of all who compete.</p>
<p>Companies should compete on variables like comfort, customer service or product life, not on whose autopilot algorithm is less likely to kill. We need an issues-based exemption to competition, one that is centred around a particular technological challenge, like autonomous driving software, and guided by a shared desire to reduce harm.</p>
<p>What would this look like in practice? The truth is that <a href="https://www.forrester.com/report/The-Benefits-Of-An-Open-Source-Strategy/RES159437?objectid=RES159437">more than 50 per cent of Fortune 500 companies already</a> use open-source software for mission-critical work. And their ability to compete has not been stifled by giving up on proprietary algorithms.</p>
<p>Imagine if the motivation to reduce harm became a core target function of technology leaders. It would end the incentive individual firms currently have to design AI that is artificially innocent. It would shift their strategic priorities away from always preventing imitation and towards encouraging competitors to reduce harm in similar ways. And it would grow the pie for everyone, as customers and governments would be more trusting of technology-driven revolutions if innovators were seen as putting harm reduction first.</p><img src="https://counter.theconversation.com/content/186101/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>David Weitzner receives funding from SSHRC. </span></em></p>Competition between corporations drives innovation and development. But when it comes to artificial intelligence systems, the prevention of harm should be more important.David Weitzner, Assistant professor, Administrative Studies, York University, CanadaLicensed as Creative Commons – attribution, no derivatives.