We can not assume that competition will exist in all markets. In fact, production in
some markets may be dominated by one firm (a monopoly) or a few firms (an
oligopoly), who could influence the price of the good
or service they produce, so that consumers may pay excessively high prices. One could argue
that high prices would attract new firms to enter these markets, and thus create competition.
However, the time lag between no competition and full competition may be so long that
consumers may have to endure high prices for a very long time, if not forever, before
the conditions in the market change. One common method of reducing competition in a market
is collusion. Oligopolies have been known to do ''under the table'' agreements, dividing
markets between firms in the market, to the disadvantage of consumers. Collusion often involves
price fixing: denying consumers effective choice. By ''colluding'', the members of
an oligopoly join together and act effectively as a monopoly.
Firms who are considered to have high levels of market
power or who engage in ''anti-competitive behaviour'' can be investigated by the
Australian Competition and Consumer Commission (the ACCC).
Follow the highlighted link to read more about the
ACCC.
