4.4.3 Impact of nature and extent of competition between firms on effectiveness
As discussed in section 4.2.3, direct marketing is a highly competitive industry comprising large numbers of resident and non-resident firms using a wide range of direct marketing techniques to market a wide range of heterogeneous goods and services.
Of particular relevance to the self-regulation of direct marketing is:
the rapid emergence of new telecommunication technologies; and
the globalisation of world markets.
These developments have a number of important implications for the nature and extent of competition between firms in Australian product markets and the effectiveness of the direct marketing code.
In some respects, rapid advances in technology can reduce the need for self-regulation to some extent by improving the efficiency with which markets operate. For example, the rapid growth of direct marketing via the Internet has the capacity to increase competition between firms by:
enabling consumers to purchase brand name products they trust through direct marketing channels as opposed to normal retail outlets;
providing consumers with unprecedented access to information on product prices, performance and availability; and
increasing the range of goods and services available to consumers.
However, rapid advances in technology also increase:
the number of new, improved and complex products; and
the number of suppliers, particularly overseas suppliers whose reputations are not well known to consumers.
This increases the scope for disreputable firms to engage in direct marketing practices and the need for some form of regulation such as self-regulation.
In addition, the combined impact of technological change and the globalisation of world markets has opposing influences on the effectiveness of self-regulation.
For example, advances in direct marketing technologies providing firms with access to much better information on consumer preferences, and an ability to stop the circulation of information to those consumers who are not interested in the products being marketed.
In addition, the globalisation of world markets is reducing the effectiveness of domestic legislation as a means of regulating the activities of firms producing tradeable goods and services, since it is difficult to force non-resident suppliers to comply with that legislation.
However, the globalisation of world markets is also reducing the effectiveness of the self-regulation of direct marketing to some extent since direct marketing standards tend to vary across jurisdictions. It also makes the development of standards more complex since it must involve consultation with regulatory authorities in other jurisdictions. This highlights the importance of ADMA’s efforts to co-ordinate the development of Australian direct marketing standards for electronic commerce with international trends.
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