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When competition is bad for consumers

Competition is supposed to drive innovation and quality up as it drives prices down, but that's not always the case. Focusing on what rivals are doing and refusing to collaborate on standards is bad for consumers.

Published onJanuary 7, 2015

competition shutterstock

“Competition is not only the basis of protection to the consumer, but is the incentive to progress.”

So said American President Herbert Hoover and it’s still a popular idea today. In theory, the companies competing for our cash have to outperform their rivals to secure it. Competition is supposed to drive them on to brave new innovations and ensure that prices fall. In practice it’s debatable whether this is always the case.

There’s no doubt that some level of competition is healthy, in that it drives us on to achieve more. Many of the top OEMs divide internal divisions or project teams and play them off against each other to hit new heights. We’re also undeniably seeing a race to the bottom in terms of pricing in the smartphone market right now.

On the other hand, there’s a clear lack of innovation in smartphones. Designs have stagnated. Competing standards are holding back new developments like wireless charging, the smart home, and mobile payments. Competition is not always good for consumers.

Copying rivals


Few companies in any industry are genuinely focused on doing something new. Probably the most pernicious influence of that keenly felt competition is the need to keep an eye on what your rivals are doing. Any success they have must be emulated. That’s how we reach a situation where countless manufacturers are producing smartphones, but they all look extremely similar and have virtually identical features and functionality.

It’s a given that any successful product is going to dictate new directions and competitors will copy elements of it, or sometimes even rip it off wholesale. But at some point that copying habit goes beyond what has actually been successful with consumers. Companies can’t afford to be late to the party and so they start emulating everything their rivals are doing. They are being guided by their competition and spending huge amounts of money to try and gain an edge with incremental improvements to existing standards.

Instead of forging ahead with new innovations companies begin to focus on how they can protect what they produce. Time and resources plowed into patents and legal teams are diverted from the creative end of the business where you need huge investment to produce great products. But if you’re fundamentally risk-averse then it’s much cheaper to copy a successful idea and build on it than it is to come up with a new one.

A lack of agreed standards

nexus wireless charging orb contents aa 600

The focus on ownership of the idea and the refusal to collaborate with others is holding back lots of technology. There’s no doubt that this is thoroughly negative for us as consumers. Why hasn’t wireless charging gone mainstream? There’s a demand for it, the technology is getting there, but the major players have been slow to come together and establish standards. It looks mercifully as though this may be starting to happen now, but the lack of agreement has stunted this industry so far and robbed us of a life with fewer wires.

Mobile payments is exactly the same story. There are so many different services out there that the entire industry is confusing for consumers and for retailers. The trouble is that mobile payments are going to offer up a small fee for every transaction for whoever provides the underlying system. It’s a potentially vast sum which is why everyone wants to stick their finger in from the OEMs, to the platform providers, to the carriers, to the new and old guard of payment providers.

Instead of evangelizing about these new technologies and teaching consumers what they can do and why they’re better than the plastic we currently use, companies are locked in a battle trying to secure networks of partners and exclusive deals to lock out the others.

The same lack of collaboration and determination to own the industry looks set to blight the smart home next. Will you be able to put together a system with the best components in home automation that actually works together without buying some expensive piece of software to act as the glue?

Closed ecosystems

iphone 6 plus vs htc one m8 quick look aa (10 of 14)

Set the interests of the tech giants aside for a moment and think about this from the consumer perspective. Why can’t we just buy the best products as determined by us and have all of our digital content work across all of them? Why can’t rival systems be synced together? Why can’t we have universal standards for accessories?

The idea that your library of apps and purchased content can’t travel with you to a new device looks increasingly like blackmail. You’re never going to get the best possible experience if you have to buy all your devices from one company. How much energy are these companies putting into closing their ecosystems down and avoiding cross compatibility?

Competition is supposed to boost quality and choice. Closed ecosystems seem like the opposite of that.

Where’s the creativity?

flagship smartphones aa (15 of 18)

Companies get used to planning in terms of their rivals all the time and closing things down. These attitudes become deeply ingrained over time. The agility and creativity you need to come up with new innovations is stifled by huge, overbearing corporate structures. There’s a reason that most of the giants of tech buy in their new ideas now. They lack the atmosphere internally to come up with them and it’s easier to acquire a startup and assimilate them.

Most of the genuine innovation in tech today is coming from small companies and the growing crowd-funded movement that can catapult someone with a good idea into business. If they gain any measure of success then the lucky ones get bought out, the unlucky ones have their idea copied by a company with a much bigger marketing machine that rolls in, undercuts them, and takes over the market.

Without startups and crowd-sourcing where would the new ideas in tech be coming from? The very competition that was supposed to drive progress is now stifling it. The sad thing is that collaboration between rivals can be mutally beneficial. Perhaps instead of focussing on what the competition is doing, it’s time that companies concentrated on what consumers want.

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