Investors and Consumers

A small point, but one worth repeating. Competition law works to benefit society, not necessarily investors in individual companies.

This story may be apocryphal but I heard of a headline in an – investor focussed – newspaper, after an air crash that focussed more on the share price of the airline than on the number of the dead. I can’t think of a better example of an investor perspective trumping a consumer one.

Competition law is on the side of consumers (as a whole) and society (as a whole), not necessarily of investors (in individual companies).

Competitive markets give consumers the best choice at the lowest price. Markets as a whole will grow, though individual companies will have to compete harder and may see their profits squeezed as a result with a consequent impact on their investors. Some companies may go out of business. But society as a whole benefits, and consumers benefit; investors in individual companies may not.

Warren Buffet famously looks to invest in companies with a “moat”. He wants companies that are buffered from the competition, not buffeted by it. (Sorry.) There’s nothing wrong with that. As an investment strategy it makes a lot of sense and has been famously successful for Mr Buffet. Nor is there anything wrong with the existence of a moat.

But the moat is not necessarily good for society. And some actions to strengthen the moat may be unlawful. That’s where competition law gets interesting.

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