There is a Safestore in Holloway, North London. The company offers storage facilities for business and personal use. I used them once to store personal possessions when I went travelling and rented out my flat.
If you go to their website or give them a call, they’ll tell you that Safestore would beat any local comparable quote by 10% for the first 8 weeks and thereafter would price match the competitor for the anticipated length of storage. This offer applies to self storage rooms of the same size within a 3 mile radius of the store.
I am sure you’ve come across similar ‘meet-the-competition’ or MCC offers at your local supermarket or another services provider, such as the Flight Centre. (Scroll down to the bottom of their homepage to read the MCC clause.)
As a consumer, you may be delighted with such fair and friendly policies. "For once we aren’t getting ripped off!”
Unfortunately, all that glitters isn’t gold.
Economists refer to such practice as an example of tacit collusion when a few companies in the same market (and therefore interdependent) act in concert to the keep the prices high.
MCC clause serves primarily as an information exchange. The Flight Centre does not need to monitor every single air fare from the UK to see what other High Street or online travel agencies are up to. A helpful customer will call up and do the job instead. If competitors know that the Flight Centre will match their reduction in prices (the threat is credible - it’s on their website, after all), they’ll be less likely to cut their fares and therefore their margins.
MCC is also very effective at deterring new companies entering the industry. Would you launch a business to compete with Safestore, knowing that you’ll be competing with an incumbent, who does not only have the advantage of being trusted by its existing customers, but it will also match your discount, should you decide to allure consumers with lower prices?
Next time you see Waitrose advertising milk at Tesco’s price, be aware of tacit collusion among the supermarket chains.
If you go to their website or give them a call, they’ll tell you that Safestore would beat any local comparable quote by 10% for the first 8 weeks and thereafter would price match the competitor for the anticipated length of storage. This offer applies to self storage rooms of the same size within a 3 mile radius of the store.
I am sure you’ve come across similar ‘meet-the-competition’ or MCC offers at your local supermarket or another services provider, such as the Flight Centre. (Scroll down to the bottom of their homepage to read the MCC clause.)
As a consumer, you may be delighted with such fair and friendly policies. "For once we aren’t getting ripped off!”
Unfortunately, all that glitters isn’t gold.
Economists refer to such practice as an example of tacit collusion when a few companies in the same market (and therefore interdependent) act in concert to the keep the prices high.
MCC clause serves primarily as an information exchange. The Flight Centre does not need to monitor every single air fare from the UK to see what other High Street or online travel agencies are up to. A helpful customer will call up and do the job instead. If competitors know that the Flight Centre will match their reduction in prices (the threat is credible - it’s on their website, after all), they’ll be less likely to cut their fares and therefore their margins.
MCC is also very effective at deterring new companies entering the industry. Would you launch a business to compete with Safestore, knowing that you’ll be competing with an incumbent, who does not only have the advantage of being trusted by its existing customers, but it will also match your discount, should you decide to allure consumers with lower prices?
Next time you see Waitrose advertising milk at Tesco’s price, be aware of tacit collusion among the supermarket chains.
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