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FOR IMMEDIATE RELEASE: 13 NOVEMBER 2007
BUYERS BEWARE: GLOBALISATION MEANS PURCHASERS MUST AVOID
ABUSING THE MARKET, SAYS ROBIN JACKSON
The increasing buying power of multi-national companies in
a globalised world means procurement professionals will have
to be more careful to avoid abusing the market, says ADR International
CEO Robin Jackson.
In ADR International's latest Business Briefing, Jackson says
competition investigations in the past have usually focused
on companies joining forces to fix prices to consumers. But
increasingly, the focus is also on companies abusing their
buying power to force down the prices they pay to suppliers.
This is known as "monopsony"', where buyers are dominant in
the marketplace, the mirror image of the better known "monopoly"
in which sellers are dominant.
The main reason for the increasing risk of monopsony, Jackson
says, is the more globalised environment in which many businesses
now operate. This gives them unprecedented buying power and
makes abuse more likely.
Jackson writes: "The patterns of concentration and dominance
created when a market is dominated by only a few buyers will
be repeated across business sectors as the unstoppable force
of globalisation drives a rise in the number of mergers, acquisitions
and strategic alliances amongst supposed rivals.
"Most of the time, there is nothing wrong when big companies
squeeze suppliers for lower prices. Effective strategic sourcing
by profit-minded business buyers can help drive down prices
for both the buyer and ultimately the consumer.
"But finding the fine line between healthy price reduction
through competitive and effective sourcing and harmful price-reducing
monopsony has made fair trading and anti-trust enforcers globally
cautious about taking action in this area.
"Competition authorities tend to bring fewer monopsony cases
than monopoly cases. However, this is likely to change as
over recent years buying power has become a recurring issue
in competition investigations in the UK, Europe and the US."
Jackson concludes: "…in future a greater emphasis is likely
to be placed on the anti-competitive effects of increased
purchasing power. So procurement professionals must beware:
today's price negotiation may be tomorrow's anti-trust investigation."
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About ADR
ADR International is one of the longest-standing global procurement
consultancies, established in 1986. It applies its knowledge
and expertise to help its clients improve every aspect of
their procurement activity. Its main areas of expertise are
procurement consultancy, training and development, sourcing
and interim management services.
ADR International works with several global corporations to
improve their procurement effectiveness. Clients include GE,
the world's biggest non-oil company by market value, Genentech,
Pfizer and Alcan. For more information please visit www.adr-international.com
About Robin Jackson
Robin Jackson, chief executive officer of ADR International,
held senior management positions in procurement with the Ford
Motor Company, Philips Electronics and Nissan. Since joining
ADR International in 1988 he has amassed a wealth of hands-on
purchasing experience with clients worldwide in the Europe,
USA, South Africa, APAC and Australasia. He holds an honours
degree in economics from Manchester University.
For more information
Please contact Mark Whitehead at Headline Media on
0208 348 3103 or 07906 720141 (mobile) or on markwhitehead@headlinemedia.co.uk
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