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What’s fair in love and war

Leigh W Sparrow, Publisher
Leigh W Sparrow, Publisher

January 27, 2013 - Competition is the life-blood of the capitalist system, affecting almost everything we do and unquestionably raises standards as companies race to offer a better product or service than their competitors.

However competition is not always such a positive force, which is why most democracies have instituted tough laws to ensure fair competition and enforce rules of the game. These rules are often bent to breaking point and frequently overlooked in specialised industries such as ours. When they are smaller companies rarely have the opportunity to appeal against unfair competition, due to the legal costs, time and the high threshold of proof required.

Competition can also be corrosive when it gets personal and vindictive, with stupid competition causing long term disadvantages to customers once the short term benefits of price slashing have destroyed competition or compromised service and quality of equipment.

Fair competition provides infinite benefits for everyone – including competitive prices and a good quality long term service and product supply for customers. It keeps companies active in terms of innovation and improvement, which is good for employees and shareholders alike. Companies providing sloppy service or second rate products, for whatever reason, go under while those at the top of their game earn a better return and grow. 

One of the oldest and most pernicious attacks on fair competition is the one for which anti-trust/monopoly laws were first established. It involves a dominant player using its position to stifle and destroy local competition. We appear to be entering an age when a number of dominant players are emerging around the world. Google is an interesting example in that it has gained a monopolistic position by introducing a ‘better mousetrap’. While it may not be intentionally harming other businesses, seemingly arbitrary changes in its search algorithms can seriously disrupt hundreds of businesses overnight. The potential for abuse is massive and for this reason the company is under the microscope of the competition authorities.

In the markets we cover a number of rental companies have gained positions in several countries that introduce the potential for abuse. Fortunately most, if not all of them, are well run and have a very healthy focus on improving their business rather than on destroying particular competitors or cornering the market.

However we have heard a few anecdotal reports of some major rental companies targeting specific regional competitors and using a dominant position to try and destroy them. Such practices are illegal and are akin to ‘dumping’ - a feature back in the 1990s.

The idea is as old as time – the larger company goes into a local market and sells its products/services below cost, using its higher prices in other markets to subsidise the local ‘assassination’ attempt. This strategy crops up time and time again as there is a fine line between fair competition where a new entrant looks to buy into a market - and abuse where a specific competitor is clearly targeted and pricing is totally irrational.

While such practices are damaging they rarely work and usually backfire spectacularly. I have a great faith in human nature and most customers when offered clearly malicious prices or proposals to switch supplier, go straight to their existing supplier and tell them what’s going on and more often than not stay put. They know that a strategy such as this is aimed at driving the local suppler out if business and having achieved that increasing the prices for what is likely to be a less personal service.

The other risk to the perpetrator is that shady practices such as this disillusion its own employees who know that such things are illegal or at best immoral. Shady business practices and corporate bullying are signs of underlying management weakness and are usually corrosive. They often result in the loss of good people who prefer not to be involved in such underhand business practices. An excessive focus on the competition also means that less attention is spent on the company’s own business.

Following the banking crisis of 2008 there has been a great deal more talk about morality in business, which has to be a good thing. My advice to anyone facing such underhand competition is to raise your game in every part of the business - including time spent with customers, improved service effort, keeping equipment in tip-top condition and introducing new innovations, while at the same time keeping a file of any competition abuses. It may also be worth letting the competitor know that you are aware of its strategy and that you are keeping a file and will take legal action if it persists.

But most important of all focus on your business and not that of the competitor a well-run local or regional rental company has many advantages over a national or international operator - except perhaps with major contractors, the attack may well result in you having a better business at the end of it?

  

 

 

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