Competition Versus Monopoly: Combines Policy in Perspective

L.T. Foster was a member of the Treasury Board staff, Government of British Columbia.

Anti-combines legislation has always been contentious. It involves government interference in the marketplace in an attempt to protect the consumer against monopoly price setting and thus make the marketplace more competitive. What this book contends is that monopoly and competition, important components of anti-combines legislation, are also contentious in theory, once the construct of “perfect competition” is examined in any detail.

Donald Armstrong, an academic and industrial consultant, develops a “theory” of competition which is based on management and entrepreneurial behaviour. This is then compared to the standard economic definition based on price theory, which assumes that competition is dependent upon the number of firms in an industry. Chapter 2 discusses these two contrasting approaches to competition, and the next two chapters develop the behavioural definition in more detail. In particular, it is suggested that competition can begin only when participants have power, a far cry from the general prevailing view that economic power results from a lack of competition. This discussion is followed by two interesting chapters on the concepts of monopoly, which provide the final basis for a discussion of policy perspectives.

Armstrong suggests that government anti-combines legislation should recognize that tremendous competition occurs even though only a few firms may be present in an industry. Furthermore, if legislators are concerned about the effect of monopoly on the restriction of new firms into the marketplace, the anti-combines legislation should concentrate on this concern. Armstrong also contends that government should not only weigh the benefits of new legislation against the administrative and implementation costs, but should also put its own house in order by reviewing existing regulations and crown corporations, which restrict the freedom of entry of firms into the marketplace.

Although the book makes a useful contribution to the anti-combines debate, it is doubtful that it will reach its intended audience — the intelligent voter and opinion leader. Although it has a good preface and its humour relieves some of the dry economic theory sections, the numerous diagrams do not make for easy reading and tend to confuse the non-economist, rather than assist in an understanding of issues. On the other hand, the nearly 200 articles, books, and reports referred to in the text make the book a useful reference source for university or college economics students.