Restricted service fields can gain the most through freer rules for
competition
VINOD DHALL
Posted online: Wednesday, June 20, 2007 at 0000 hours IST
From the competition perspective, regulatory rules that inhibit
competition amongst professionals, but whose justification (usually
related to quality maintenance) is tenuous, need to be reviewed. For
example, the rules that prevent price competition, control forms of
business structures, and restrict advertising. Some professional
regulators/associations prescribe the level of fees/charges, or lay down
floor rates or price caps. In respect of business structures, some
regulators/associations allow only partnership firms but not limited
liability companies. Some rules prohibit advertising, including the
truthful kind. In the eyes of competition authorities, such restrictions
adversely affect consumers by restricting choice, raising prices and
inhibiting innovation. These serve the interests of established members
of the profession more than the consumer of these services. Fortunately,
advocacy by competition authorities is getting a hearing, and recently
reforms have been undertaken in several countries, principally in four
areas:
1) Entry and access restrictions: ....
2) Fee control: Mandatory fee scales are being challenged ....
3) Advertising prohibition ....
4) Forms of organisation ....
—(To be continued)
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