The Language Of Limited Competition

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The Competition Bureau is an independent law-enforcement agency that polices the business world by enforcing the Competition Act. However, spotting market manipulation isn t easy especially when market factors have led to industry consolidation. In anti-trust cases, intent can be the deciding factor between circumstantial market conditions and contrived ones.

The following is a list of economic terms that are often heard when the state of the Canadian cattle industry is discussed (foul language not included).

” Monopoly A single entity in control of the supply of a particular commodity or service, characterized by entry barriers for potential rivals to try and compete.

Example: One packing plant processes all of the beef available to be purchased by retailers.

” Monopsony A single purchasing or consuming entity to whom a manufacturer or producer is forced to sell to because there are no other options.

Example: One retailer remains to buy beef from a number of packing plants.

” Oligopoly Limited competition where a sector is dominated by a handful of sellers characterized by prohibitive start-up costs and massive efficiencies of scale in existing companies.

Example: The current meat-packing industry, as it is seen by the retailers because they have few domestic suppliers to buy from. However, the grocery retail market is also consolidating and could almost also be considered an oligopoly by its own customers.

” Oligopsony Limited competition where a sector is dominated by a handful of purchasers.

Example: The current situation in the beef industry where there are many feedlots selling to only two packing plants.

” Collusion When rival companies co-operate for a mutual benefit to secure market success or longevity, usually taking place within an oligopoly.

Example: If Canada s two remaining beer companies were to discuss and set a price, thereby overriding the free market influence of supply, demand and competition.

” Cartel An alliance formally agreed upon by competitors to regulate prices, marketing and production. Private cartels are illegal in most nations under anti-trust laws, although public (government) cartels are a more of a grey area.

Example: OPEC.

Of course, classifying any economic reality in one country is much more difficult and nuanced with the advent of free trade agreements and a global economy. However, domestic economics can still come home to roost in the event of an economic catastrophe such as BSE.

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