Santa Claus Under Attack by French Regulators

Valentin Petkantchin
Issue CXXXIX - January 18, 2008
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Christmas time is behind and good children have certainly received gifts or toys from Santa Claus. But despite his goodwill, Santa is having more and more hard time delivering the goods because of over-regulation, especially in countries like France.

Valentin Petkantchin, Research Director, Institut économique Molinari
France indeed is one of the champions in regulating retail trade and shopping. The government – instead of shop keepers and owners – is deciding, for example, not just openings on Sundays, when sales periods are to begin and to end. It also strictly regulates relations between manufacturers and distributors.

And here is where the regulatory nightmare of Santa Claus really begins. Whatever the prices of his toys – whether different or the same from one shop to another – Santa Claus is going to be wrong!

First, if different, Santa Claus may be prosecuted under the so-called Galland Act which sets "ceiling" prices prohibiting the sale under a certain bureaucratically defined level. It also forbids so-called "discriminatory pricing." Logically, to avoid being prosecuted, Santa Claus' suppliers respectfully tend to follow the same prices, the same discounts, and even the same sale conditions.

How can French regulators expect – unless they really believe in Santa Claus miracles – that suppliers of toys would offer advantages and lower prices to a distributor, if other distributors could demand the same favourable conditions under the law? Similarly, how can they believe that a distributor would negotiate better deals for its customers if any of its competitors could get the same favourable conditions by invoking "discriminatory pricing"?

Despite this regulation which obviously blocks competition between various distributors, preventing them from negotiating lower prices and better sale conditions for consumers, there is still some of it among distributors.

Because they cannot compete on prices, Christmas consumers are instead being offered loyalty programs that provide reduced-price coupons or customer rebates and discounts – for example Carrefour, the giant retailer, gives its loyalty cardholders 25% off the price of about 100 toys.

Yet even while his retail representatives abide by the absurd Galland Act and mark their goods with identical prices, Santa Claus is unfortunately not out of trouble. He is then an easy target for consumer advocacy groups and anti-trust regulators; the latter have just inflicted fines of 37 million euros on a group of producers and distributors of toys in France. For what reason? Santa Claus has been fined for having practiced and agreed on the same prices across different French shops!

Agreements on identical prices for the same toy indeed do not in themselves hinder free competition: isn't such pricing indeed applied by any manufacturer selling directly to consumers, a bewildered Santa Claus may rightfully object?

Moreover, there is actually no benefit from such fines for the consumer who will have to support their consequences at the end of the day through less choice or higher uniform prices.

French regulators really do their best to make Santa Claus' Christmas mission Kafkaesque. When will the French realize that Santa Claus really doesn't need all their government's over-regulation, if they want him to offer higher-quality and lower-priced toys to their kids? On the contrary, what he needs in France is real deregulation!

Valentin Petkantchin, Research Director, Institut économique Molinari

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