Column by Stefan Meyerhans: Good results without judges

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Objectively speaking, global regulation is a very beneficial solution for everyone involved, especially consumers. I also prefer it to price guidelines, which is also one of my tools. Why?

When price increases are being considered, as has been the case this year at the Post Office or on public transport, the relevant exhibitors submit their plans to me for evaluation some time before the planned implementation. If the increases don’t work out according to my calculations, I will intervene. It is clear that my interventions are often not well received by companies.

If I send them a price order, it usually results in a lawsuit. It takes years, is expensive, requires resources and is subject to uncertainty during this time. After all, it may even be that potential gains no longer matter because the world has changed and other price-related events have occurred in the meantime. That’s why I use the pricing solution as a last resort – if we don’t get to the finish line otherwise.

The settlement does not have these problems. It does not require any special form and does not require any significant bureaucratic effort. It actually works very similar to contract negotiations in the private sector. The difference is that an agreement with me will only be possible after the new prices are outside the unfairness range I have calculated. Mutual agreements are limited in time so that the company does not have to bear the risk of changing circumstances for too long. However, it can (or should!) be extended after the expiration of the established period.

Overall, I can say: a settlement agreement is a quick, non-bureaucratic, inexpensive and effective solution. It typically takes “only” a few weeks or months before price increase plans are brought down to the “appropriate” range—or prices that are too high are reduced. The benefit to consumers is usually that they will never have to pay the originally planned price increase, but only the negotiated price that has been determined to be non-abusive. I think this compromise will benefit everyone involved.

If you want to learn more about this topic, I recommend the book Cooperative and Coordinated Administrative Action, written by one of my colleagues, Patricia Kaiser.

Source: Blick