AdC publishes paper on competition and purchasing power in times of inflation
Press release 15/2022
16 August 2022
The Portuguese Competition Authority (AdC) published a paper emphasizing the role competition can play in protecting purchasing power in times of inflation.
Even if competition policy is not intended to address surging inflation in the short run, it can contribute to achieving a more sustainable economic recovery at a lower cost.
To promote competition in price, quality, and innovation, the AdC advocates the elimination of unnecessary barriers to entry and expansion, as well as the reduction of switching and search costs. At the same time, the enforcement of the rules by the AdC, through merger control and the investigation of anticompetitive practices, contributes greatly to keeping markets open and competitive. The importance of fighting cartels in public tenders is also highlighted, in order to avoid waste of public funds and overspending in times of inflation. This ultimately saves resources that can be channelled to better purposes, such as public measures to promote economic recovery.
In times of inflation, there is a greater propensity for governments to implement administrative price controls. In this regard, the AdC warns of the risks that such measures may bring to competition, as price controls distort price signals in the market and may unintentionally lead to supply shortages and disruptions in the value chain.
The AdC reiterates:
• Each firm should set its prices and strategies in the market autonomously (in relation to its competitors in the market).
• The potential risks of imposing a price caps in terms of impact on competition should be assessed, as well as the existence of alternative policies that may achieve the same objective.
• Temporary disruption of supply chains or any form of public announcement of prices should not be used to disguise a concerted practice.