Book Description

Government has a substantial impact on markets. Laws and regulations designed to promote important public policy goals may, for example, distort markets and affect competition. Government bodies competing with private companies have advantages because of their government links even when competition laws apply, leading to pricing which does not fully reflect the cost of resources. This distorts decisions about production, consumption and investment by government bodies, private competitors and potential competitors. There are a number of ways in which these issues can be addressed and approaches differ between jurisdictions. As far as anti-competitive regulation is concerned there are usually a number of ways to achieve a policy goal. As consumers are generally better off when markets are more competitive, rules and regulations should be assessed for their impact on competition. Choices which minimise anti-competitive outcomes clearly assist efficiency and competitive markets. Competitive neutrality (CN) policy initiatives directly address the market advantage of government businesses. CN policy recognises that government business activities that are in competition with the private sector should not have a competitive advantage merely by virtue of government ownership and control. Market advantages in this context manifest in a number of ways. Distortions by advantaged government business enterprises may be direct and clear-cut or more subtle.