Absence of Competitive. Pressure can lead to Poor Quality Service The ability for some distributors to act in a manner where they are indifferent to the costs imposed on traders arises because the distributors are subject to neither competitive pressures nor regulated performance requirements. Drawing on the provision of meals in the airline industry (which at that time had regulated prices), White (1972) demonstrated that “a competitive industry under price regulation will offer more quality per unit of output than would a simple monopolist”,2 assuming profit-maximising behaviour. Distributors are subject to price regulation by the Commerce Commission precisely because they are (near) natural monopolies. Xxxxx’s conclusion therefore means that profit-maximising distributors will provide a lower level of quality than would a similar firm operating in a competitive industry. Some distributors will, however, seek to improve service. Some will face competition from new technologies and seek to respond by improving service (while others may seek to respond by using price and non-price barriers to block the access of the new technologies). Other distributors may seek to improve service because they are genuinely customer-focussed and understand the impact that their service has on the end consumer. Examples of situations where poor quality service maybe provided include: • A retailer may spend considerable time on corrections and rebilling when a customer is incorrectly set up in the registry by a distributor. • A distributor may fail to provide supporting data for billing, which may make it difficult or impossible for a retailer to reconcile billing information accurately, ultimately causing more time to be spent on these processes and preventing prices to the consumer from being as low as they might be. • A retailer may provide poor quality or incorrect data that creates substantial re-work for the distributor.
