Sometimes "More Regulation" Can Help Big Firms

One of the quite-likely outcomes of new privacy protection laws is that they will raise costs for small firms (compliance costs), making it easier for big firms to stay dominant. That invariably is the case for major legislation to regulate any industry. What often happens is that smaller firms cannot stay in business as regulatory costs rise, reducing profit margins, where large firms have market power and can pass such costs to customers.  

That might also be true for many types of regulations that are well-intended but have externalities. That, in fact, is precisely the argument made about the European Union's General Data Protection Regulation. It is the same argument made about Dodd-Frank banking regulations: it imposed compliance costs tough for small firms to bear.   

Perhaps oddly or serendipitously, rules intended to protect consumers might also protect the reputations of suppliers, even if suppliers often oppose such guidelines or laws. That might be especially true when suppliers are big, few and reliant on their reputations.

Consumer protection laws might not work so well when sellers are so many they are virtually anonymous, and when some are willing to break the laws or regulations as a routine business practice. Think about rogue telemarketers or other unethical actors, for instance.  

Complaints by consumers about their communication services is not a new issue in Australia or the United States. In Australia, new attention is being paid not only to billing, customer service and network quality issues, but now also credit and sales practices.   

New industry guidelines outline sales, credit and debt managment practices reflecting the

Telecommunications Consumer Protection (TCP) Code, the Industry code of conduct that sets out what Suppliers must do in relation to sales, billing, and credit and debt management.

The codes especially seem to protect “vulnerable” customers from upselling and cross selling that might not reflect customer needs. The guidelines also aim to ensure that credit checks essentially protect consumers from purchase of products they cannot afford.

Big firms can benefit from expanded regulation. Small firms generally do not benefit. Criminals and bad actors do not care.