Five years ago, almost to the day, Gérald Darmanin went to Polynesia for the first time as Minister of Action and Public Accounts, to visit the customs of the archipelago for which he was responsible. Rebelote last week, this time in his capacity as Minister of the Interior and Overseas. A visit placed under the sign of the Olympic Games, while the surfing events must take place on site. This trip ended on Saturday August 19 with the announcement of the launch of a mission to fight against economic monopolies in the overseas territories.
“There are very high prices and when there are very high prices, it’s the daily Polynesians who can’t get by,” said the government’s number three at the microphone of local television channels. Polynésie La Première and TNTV. For François Lévêque, professor of economics at Mines-Paris PSL and specialist in competition issues, there are few or no monopolies, but rather oligopolies in the overseas territories. According to him, it will be difficult to prove the existence of market power exercised by these companies.
L’Express: Are economic monopolies a reality in overseas territories?
Francois Leveque: A monopoly means that there is only one company to supply and sell to a large number of buyers. Strictly speaking, there are probably not many, if at all. There are usually several importers and distributors, but very few. It is rather a problem of companies in oligopoly. These are then able to obtain a surplus profit.
Do we really need a fact-finding mission to see that they exist?
What must be noted is precisely to what extent the highest prices in these territories are explained by reasons of insufficient competition. We must not forget the well-known structural causes, which are that you have markets that are both small and isolated, and therefore less economies of scale. And then obviously because these territories import most of their food products and capital goods, you have specific transport, landing and logistics costs compared to mainland France. There are therefore already good, so-called structural reasons, which explain the high prices for most goods.
Is it difficult to prove that these oligopolies generate very high prices?
Yes it is quite difficult to highlight anti-competitive prices. If you are in the United States or in a large territory like Europe, it is already complicated to show if the prices are high because the costs are high or if it is because the margins are much higher. In large countries, transport and logistics costs are well known and generally low. For example, it is not very expensive to import a car from Germany to France. On the other hand, the additional structural costs in small and isolated territories are enormous.
Are these oligopolies easier to set up in overseas territories than in larger territories?
These are small markets with growth that is not phenomenal, within which there are no new players who will appear. Imagine that you are a seller of original socks on the metropolitan territory, you are not going to target a small distant territory because it is not very interesting from an economic point of view. In the fairly classic form of competition, you have new entrants. Disruptors will offer a lower price and higher quality products. These drive competition. This is not the case for small markets.
Moreover, there is also a problem of economy of scale in these territories. As the demand is much lower, you will only have two or three companies to respond to it, instead of having a dozen good size ones like in mainland France. This also explains the low concentration. You still have a dilemma between economies of scale and concentration.
We talk a lot about food products, are other expenditure items affected today?
Imports of construction goods, such as cement, and energy goods are important. For fuel, the competition authority had carried out an investigation. It is more expensive because it has to be imported. In France, we have refineries, but we also import fuel. However, if it is brought in from a German or Belgian refinery, the cost has nothing to do with transporting it far away by ship and then unloading it in a small port.
Are the competitive mechanisms insufficient today?
I ask to see, on the first stage, a well-conducted and in-depth analysis to understand to what extent the price differences are explained for 100% by structural reasons, or for 95% by structural reasons and 5% by a problem of competition or if it’s 50-50. In the latter case something has to be done, but in the second it is perhaps not worth having an army of civil servants and carrying out checks if we are playing on these few percent. We can also act on the structural aspects. Is port activity well organised? Can’t we modernize logistics, save money and gain productivity?
If at the end of this mission, the existence of market power exercised by these oligopolies is proven, is there a way to constrain them?
The Competition Authority is there for that. Its officials know how to do and carry out investigations with experience in these territories. The state is not helpless. You also have the DGCCRF. What makes you smile is that it is Minister of the Interior who announces it and not that of Economy and Finance. However, it is not his responsibility.