Tuesday, 14 April 2015

Are we getting a competitive deal - 2015 version

The Electricity Authority has done everyone a service. It's just come out with its latest surveys of the state of competition in the electricity industry and - because it needs to know whether the level of competition in electricity is good, bad or indifferent compared to other industries - in a range of other sectors. It's got two surveys, one of the general public and, if you're into electricity, one of stakeholders in the electricity industry. These surveys are a great thing to do, especially as they are now beginning to develop a bit of history: when I first wrote about them, there were only two surveys' worth of data, but now there are four, and we can maybe start to see patterns over time.

Here's the key graph from the survey of the public, which shows people's responses to the question, "Using a 0-10 scale where 0 means not at all competitive, 5 means just adequate and 10 means extremely competitive, how competitive are the following businesses in terms of working to get your business and offering you the best deals? If you do not know enough, just say so".

It's hard to know which of these results is the most intriguing. The ranking of industries is interesting: for all the concerns expressed about our supermarket duopoly, consumers evidently feel that it's a competitive one, with the the two of them duking it out in the marketplace, and they rate the deal they're getting ahead from the supermarkets a little bit ahead of the others in the survey. The low ranking of online bookstores, by the way, is because there's an unusually high proportion of 'don't know' answers, which kind of surprises me as I'd have reckoned anyone buying a book these days must have given the offshore services  a go by now, but there you are. If you're interested in the minutiae of the poll results, I've out a detailed table at the end of this post, 'over the fold' as they say.

The most recent trend, admittedly on this short series, is a little bit of a worry: except for petrol stations, the trend over the past year has been for the degree of competition to ease off a bit. Perhaps in the currently strong economy, sellers don't feel they have to compete quite as hard to earn a crust? As for petrol stations, while I'd generally go on the assumption that people are perfectly capable of making good judgements about suppliers and the deals they're offering, I'm not sure in this particular case whether motorists have been able to separate out how much of lower prices is due to lower import costs and how much to any increased intensity of competition (you might be interested in my earlier post about what's happening at the petrol pump).

These are great surveys: full marks to the Electricity Authority for running with the idea. It does, naturally, raise the question why the Commerce Commission isn't doing the same across a wider range of sectors. As I've argued before, "I reckon it's time for the Commerce Commission to belly up to the bar and tell us what real differences [in levels of competition] are happening in our markets".

And if they don't, or can't, or won't, maybe we should pirate one of the recommendations of Australia's Harper review of competition policy (if you haven't caught up with its excellent work, start here or go to the thing itself). It argued (in Recommendations 43 through 47) for a new pro-competition advocacy body, an Australian Council for Competition Policy, that would among other things "develop an understanding of the state of competition across the Australian economy and report on it regularly" (p76). It's a good idea, and we should steal it.

Finally, for anyone who wants the more detailed responses, here they are.

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