why do oligopolies collude although it is illegal in south africa?
Answers
Explanation:
Changes to South Africa’s competition law have widened the scope for the country’s antitrust bodies to punish anti-competitive behaviour. But implementing the changes, which were passed into law five years ago, is proving to be fraught.
The Competition Amendment Act gives the Competition Commission powers to investigate complex monopoly conduct in a market. Under certain conditions, it allows the Competition Tribunal, which adjudicates competition issues referred to it by the Competition Commission, to prohibit such behaviour. Complex monopoly is where firms tacitly act as if they are a single firm in setting prices in the market.
The provision that gives these powers, Section 10A, has not yet been enforced more than five years since the amendments were promulgated. It is one of a number of amendments that have not come into operation. It is not clear what is causing the delay. One possible explanation is that government is aware that some of the sections may be unconstitutional. It may be trying to avoid unintended consequences or difficulties in the operation and credibility of the amendments.
Extending liability
If Section 10A comes into effect it will mark a significant change in the country’s competition law. It extends the liability for prohibited anti-competitive practices by firms beyond an agreement or concerted practice to include tacit coordination in certain concentrated market structures and circumstances.
One consequence of this would be increased scrutiny of pricing practices in oligopolistic markets. These are markets where only a few firms compete. The banking sector in South Africa is one example.
It is well-known that oligopolists are ‘interdependent’ in their pricing decisions. The prices they charge are based partly on their competitors’ anticipated responses.
Recognition of their common interest often leads to less vigorous price competition and prices that are elevated substantially above competitive levels. Examples of these kinds of pricing practices are:
price leadership, where a firm sets the price and its competitors follow;
meeting competition clauses, such as matching competitors’ prices;
most favoured customer clauses in contracts;
uniform delivered pricing policies; and
facilitating practices, such as exchanges of price information and price signalling.
Answer:
Oligopoly necessitates collaboration among all enterprises in order to raise prices and achieve higher economic benefits.
Explanation:
- Oligopoly necessitates collaboration among all enterprises in order to raise prices and achieve higher economic benefits.
- The maximum oligopolistic industries are the ones wherein merchandise are incredibly homogenous and offer purchasers with comparable benefits.
- The South African mobile market may have been classified as oligopolistic or duopolistic before to the recent entry of Virgin Mobile, with two businesses of roughly equal size, Vodacom and MTN, dominating the industry.
- Oligopolists are widely recognized for their "interdependence" in pricing. They set their prices in part depending on what they expect their competitors to do.
- South Africa's antitrust regulators have increased their authority to punish anticompetitive behaviour following the reform of the country's competition statute.
- The Competition Court, which, subject to certain conditions, decides on competition questions submitted by the Competition Commission, permits such conduct to be prohibited.
- In a complex monopoly, a company implicitly acts as if it were a single company by setting prices in the market.
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