Why price recommendations are not ideal

Why price recommendations are not ideal

Mr Paul Chan Poh Hoi opined that "it is not true that recommended prices go against the spirit of competition" and that "the Competition Act has hurt, rather than reinforced, consumer interests" ("Recommended prices not against spirit of competition"; Tuesday).

Like Mr Chan, we believe it is useful for consumers to have more information on prices, so that products that cost more would have to be better in order to command higher prices.

To this end, the publication of historical and current price information by independent third parties will generally not infringe the Competition Act and can serve as useful reference points for consumers.

Some trade and professional associations have argued that price recommendations are necessary to maintain prices at a minimum level, as price competition inevitably leads to lower-quality products and services.

As Mr Chan correctly pointed out, "higher prices do not always guarantee better quality and service".

In some instances, the Competition Commission of Singapore (CCS) has found that these price recommendations were, in fact, a guise for price fixing among competitors to justify price increases.

For example, in the case of the Association of Modelling Industry Professionals (Amip), the CCS found - and the Competition Appeal Board affirmed - that there was a 60 per cent increase in modelling rates for fashion shows. This was brought about by a price-fixing agreement among Amip members under the guise of price recommendations issued by the association.

The competition authorities in many jurisdictions, such as the United States, Britain and Australia, have recognised that price recommendations issued by competitors or their professional/trade bodies are likely to be harmful to competition.

The underlying rationale for the Competition Act is that competition drives businesses to innovate and become more productive and efficient, to ultimately benefit consumers.

As Singapore's national competition agency, the CCS aims to grow a vibrant economy with competitive markets and innovative businesses. This will inevitably benefit consumers as competitive markets create the best value for consumers.

In the price-fixing case involving the Express Bus Agencies Association and its members, a post-enforcement study by an independent consultant found that the prices of tickets declined by about 25 per cent after the CCS' intervention in breaking up the cartel.

We thank Mr Chan for his views. We note that he has referred to a number of sectors in his letter, and we invite him to provide us with further information on anti-competitive business conduct in these sectors.

Lim Le-Anne (Ms)

Senior Assistant Director, Corporate Communications

Competition Commission of Singapore

This article was published on May 16 in The Straits Times.

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