Competition proves good for consumers

IF you think, for a minute, about business buzz words, a few in common use come to mind. "Competitiveness" has been around for a while and few conferences pass without a discussion of "globalisation". Bold new eras for business are always being predicted, of course, but technological advances and the international spread of business have genuinely changed the game in many industries in recent years.

But one sector had seemed immune from competition. Large parts of the services sector sell purely to the home market and have not faced the same competitive pressures as much of the rest of industry. For example, while parts of the financial services sector are fiercely competitive, consumers have not got such a good deal in others.

The legal profession has come in for heavy criticism for some of its practices. And many studies have examined how the allocation of taxi licence plates affects the level of service to the public.

There are now signs, however, that things are changing. Three recent examples support the case. First, The Irish Times revealed that the Competition Authority was objecting to the way the life insurance industry paid commissions to intermediaires for selling products to the public. Its final decision on the subject is expected shortly.

Second, Irish stockbrokers face a cut in the commissions they earn for selling Government gilts. And now an almighty row has broken out between Ryanair and the travel agents over the commission that the agents take on tickets.

What have been the catalysts for this change? One has obviously been the increasing role of the Competition Authority, which has recently been given greater powers. The authority clearly has its teeth stuck into the life insurance industry and is now being asked to look at the fixed commission arrangement which operates between Ryanair - and the rest of the airlines - and the travel agents.

Increased consumer awareness is clearly also a factor - the Consumers' Association has played a major role in the life insurance issue. And, as the Ryanair situation shows, businesses which must compete on international markets are also looking to get a better deal for the services they purchase on the home market.

And international competition is also creeping in. Irish institutional investors were rightly asking why they had to pay 0.35 per cent commission to Irish brokers and 0.25 per cent in London.

Overall, the trend to greater competition is undoubtedly good news for consumers. It might be a mistake, however, to expect that more competition always brings lower prices.

In the case of life insurance, for example, the main benefit to consumers from a change in the commission agreement may com¬ through lower costs but through the disclosure of how much commission they pay when purchasing a product. But the onus is then on the consumer to use this information.

Equally, travel agents will argue that if their commissions are cut they will not be able to offer the same level of service to their customers. But with fixed commission agreements under attack in all sectors and airlines under pressure to cut costs, the travel agents are likely to have to accept change sooner rather than later.

In the years ahead the advent of the euro - the single EU currency - will give a further push to competition across all sectors. If the euro is successfully introduced, consumers will soon be able to compare prices across Europe and it will become much easier for businesses to offer both products and services across international frontiers.

Add to this a more active competition policy and advances in technology such as the Internet and it is clear that competition for the provision of a whole range of services to the public can only intensify in the years ahead.