Monopolies Good, Bad, What If's

It may be more useful if we had all the toll road projects together in one financial assessment to consider whether this is reliable. Each one will have different returns or circumstances. One source of industry information, but not for free?

CPI is a complex number with many factors. The cost of building a major road project does not follow CPI. There is a subset of the CPI included in the project costs, and complexity in how some projects have been financed.

Toll operators seek a commercial return on their investment. This may be the original construction cost, or a discounted purchase price paid to the previous is owner/builder. Most are on long term leases/concessions? Whether it has been a good deal for consumers, as you note one business Transurban holds the rights to approx 3/4 of the toll roads nationally!

If you are interested, perhaps there is some follow up from the ACCC and government. It’s some time past.

Note:

Post edit - the following ABC opinion piece asks even more questions as to the benefits or not of the investment in Sydney’s toll network.

Business costs can’t truly track CPI and in the case of toll roads business costs such as labour, contractor, services and materials don’t track CPI. Changes in these costs would affect operating costs for a toll road operator. Some of these costs are also not in standard macroeconomic CPI calculations.

Notwithstanding this, usually there are alternatives to the toll road, which may be longer or take more time. One has to evaluate whether the toll cost is preferential to increased distance and/or time.

With recognition local costs are not 1:1 the toll costs in US metro areas are a fraction of our own
It might be justified or another ‘nothing to see, next’ type matter.

Except when routes are closed to fulfil contract terms to force people to use the toll road.

The aim of any commercial enterprise is market dominance - effective monopoly. At what point is that achieved?

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Speaking of monitoring our competitors… I was shocked to see that many items of fruit and veg at Coles and Woolworths in Sydney were selling for IDENTICAL prices. In the US such collusion is not only frowned upon but is vigorously stamped out. In Oz it seems to be tolerated.

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It may not be collusion but competition. Australian shoppers often buy based on price and if they know that say Coles in cheaper than Woollies, they might decide to shop their. Coles and Woolworths (and other supermarkets) making their competitors prices is a disincentive to change the supermarket one shops that.

If say Woolworths dropped their banana price to 5% less than Coles, Coles is likely to respond by matching the price or potentially trying to better it. This is how competition works.

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At Rusty’s Markets in Cairns, all of the 100 or so stall holders generally have identical prices for fruit and vegetables.

Much like the thieves in the local fuel cartel having identical prices.

I beg to differ. Competition works when an industry player is prohibited from controlling in excess of a certain share of the market. As a school kid I learned that only in the former Soviet Union was the supermarket sector more concentrated than in Aus.

No wonder it was so hard for ALDI to get a foot hold here. Not to mention KAUFLAND tossed in the towel last year when it saw how closed the sector is to competitive forces.

I suppose you can’t blame them for playing within the rules. You must blame the rule makers for clearly sleeping at the wheel.

You are confusing monopolies/duopolies with competition. Competition is when two or more businesses adjust prices to capture a known demand. Competition can’t exist in a monopoly, but can exist in a duopoly or more than two businesses within the same sector. Where there is a monopoly, these are regulated to ensure fair pricing to protect consumer interests.

How, Aldi has been very strategic in its expansion and has beempn very successful in capturing market share in areas it trades.

It is worth reading why Kaufland pulled investment in Australia. Like Cosco, Kaufland is a volume low margin business. If you don’t have volumes in a small marker like Australia, it doesn’t stack up.

ALDI had many hurdles to overcome in Sydney. In one shopping centre Coles made it possible that parking would be free if one has a coles receipt, a SHOP A DOCKET as it was called, but the shopping centre did not tell ALDI of this. And ALDI did not have such SHOP A DOCKETS
I discovered this shenanigan, pointed out to ALDI’s top dog (who blasted the shopping centre) and in a week the shopping centre took away Coles’ unfair advantage.

On the matter of competition in duopolies, it can only exist in the non price arena. Such as in the good old days, Ansett and Qantas. Of course the best way to achieve and encourage competition is to allow easy entry into the market. Paul Keating, a great Australian who either did not understand competition or had his reasons for avoiding doing some good allowed Qantas to buy TAA (or 'Australian Airlines" as it was then). Thus cementing a duoploly Qantas (+ Australian) v Ansett, where he should have allowed a foreign airline to buy Australian, thereby creating a three firm market where collusion between two would not dictate prices and quantities offered.

The low price guarantee topic diverged into monopolistic behaviour so I moved that divergent discussion to this existing topic where it seems more germane.

FWIW prior to that ‘merger’ Qantas was international and Ansett and TAA were domestic. Selling an airline to a foreign firm has national security implications be they real or imagined, and as time has gone on it seems our successive governments have been less and less concerned with foreign ownership - at least until very recently when it appears the US tapped a shoulder with concerns, eg the Port of Darwin and certain research engagements.

Apologies for this off topic comment that could have started another topic, ‘national security, competition, and foreign investment’ - if someone wishes to start that to continue the thought.

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A post was split to a new topic: Competition, Foreign Investment, National Security and Our Markets

An interesting standard to determine the public interest. "Other industries are worse’. On that basis Australia should save money and disband this mob of window dressers who do not even dress windows.

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What an absolute joke.

“I think News (Corp) is constrained by Nine, I think it’s constrained by the ABC, I think it’s constrained by Seven West and a lot of other players.”

Next time I am at the newsagent, I must grab a copy of the local Nine, ABC and Seven West newspapers.

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Previous posts have considered some of the risks of a single enterprise or several coming to dominate a market.

Australia presents numerous opportunities for foreign owners to invest. There is often criticism of the net benefit going off shore, often through complex tax arrangements.

When it comes to control of food supply, especially locally produced product should we be concerned?

How evident is it to consumers that the product may be supplied through a foreign controlled company, or if there is real competition for that supply?

A couple of interesting asides.

Australia has $3.5 trillion saved in super as of March 2022.

The publicly listed companies on the Australian Stock Exchange at the end of March 2022 had a market capitalisation of $2.7 trillion. This value excludes any privately owned businesses or unlisted foreign ownership.

If Australian meat processing for Aldi, Coles, Woolies and MacDonalds is a profitable investment, why would it be foreign owned?

It seems foreign buyers are less risk averse and have deeper pockets than Australian buyers and can often outbid when Australian businesses are up for sale.

The ACCC will, in theory, have something to say if they sniff a possible monopoly situation. Assuming they have a book-marked dictionary nearby to check what that means.

The FIRB seems to pretty much wave through anything, as does the Treasurer, unless there is a some political side to it.

If JBS were Chinese, and not Brazilian?

Or in this instance, Coles can see a benefit in keeping it home owned, and if approved “in-house”.

It’s an interesting response from the farmers whose national body are also arguing:

There is a recent advertising campaign on TV against the changes saying it will cost consumers by imposing equal pay for farm employees.