Is competition law an unaffordable luxury?

In studying the symptoms of problems – such as high marketing costs, high physical losses, high transport costs – barriers to entry leads one to believe that the symptoms are in fact the problems. But what causes such problems?

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Barriers to entry in processing, however, are frequently a direct result of government licensing and trade policy. Monopolistic profits are often earned where such policies exist, and substantial improvements in economic efficiency and income distribution could result from a policy that promotes more vigorous competition.

Competitive markets ensure that no price distortions are caused by monopolistic profits or manipulations, which frees policymakers to worry about other potential sources of market failure and the consequences of competitive markets for income distribution. The most important first step, however, in instituting a policy regime supportive of small enterprise growth is to eliminate the existing policy biases against the small private producer.

This might be expressed in terms of the need to ‘level the playing field’ so that policies are at least size ‘neutral’.  Unfortunately for small-scale maize millers, large-scale industrial maize miller firms (which previously had a virtual monopoly on the urban market) again have a competitive advantage, as the SA government requires maize flour to be fortified with vitamins if it is to be sold at a retail level. Imperfections and inefficiencies in the agricultural sectors of developing countries are really just symptoms of their marketing problem. The cause of those symptoms goes much deeper.

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