What was less awesome was the $9 I paid for a package of M&Ms and a bottled water and the $17 I paid for parking. I anticipate gouging on food and drink at hockey rinks since they have a monopoly and prohibit the bringing in of outside food, but I was surprised to find that the parking lot near the arena charged $17, considering that it was only about five per cent full (the concert was not very well attended).
For those not familiar with the area, Scotiabank Place is located in Kanata, Ontario, about 25 kilometres southwest of downtown Ottawa. The arena is more or less in the middle of nowhere, with not much around the arena except about 10 different parking lots totalling about 6,500 parking spots.
Given there were so many parking options (i.e. numerous suppliers) and so little demand for parking spots that evening, I was surprised the lot was charging $17. One would think another lot would undercut the price and get all the cars, and that there would be a race to the bottom among parking lots. My guess at the time was that the parking lots were all owned by the same company, or that there was collusion between the various parking lot owners to keep prices high.
In fact, it appears that the Ottawa Senators, the main tenant of Scotiabank Place, also own the arena and the land around it. It seems that the team has control over parking prices, although according to Ticketmaster, parking management is contracted out to Ideal Parking.
That's a little bit unusual for pro-sports arenas, as most are located in city centres where there are numerous parking lots that belong to several different owners. The fact that Scotiabank Place also controls its parking is crucial, because if the arena owner doesn't control parking prices, he or she may face lower ticket sales if parking prices go too high. The parking lot would have an incentive to gouge, since once you buy your ticket and drive all the way to the event, you're not likely to forgo parking and go home. But the arena would suffer decreased repeat business in this case; owning the parking lots instead gives the arena an incentive to charge reasonable prices in order to encourage repeat business.
Still, I wonder if the parking situation at Scotiabank Place is legal. The Competition Bureau is responsible for making sure companies operate in a competitive manner, and can punish companies if they abuse their market power. Apparently, this can happen if three criteria are met:
- The dominant firm has market power — the ability to set prices above competitive levels.
- The dominant firm engages in anti-competitive acts — business practices that are intended to reduce competition. These include buying up a competitor's customers or suppliers, using discount brands to keep out competitors, cutting off essential supplies to rival companies, using long-term contracts to stop customers from changing suppliers and overstepping authority granted by intellectual property rights.
- The anti-competitive acts have substantially lessened competition, or are likely to do so.
I wonder if the high parking prices don't hurt the arena by keeping fans away (yes, there are alternatives such as public transit and taxis, but the arena is so distant from the city centre that it makes these options much less desirable). Still, it would be interesting to see what would happen if someone were to submit a complaint to the Competition Bureau. Maybe I'll send one in for the fun of it.
I've got some questions:
ReplyDeleteIs it not a little silly that Scotiabank Place cannot legally charge whatever they want for parking? I thought that was the whole basis of capitalism - that the market will determine what is fair? If people don't want to pay for the parking then they won't go to the arena.
And why should Scotiabank Place have to rent out their own land to satisfy some vague anti-competitive law? When I look for companies to invest in I want them to have a moat as wide, deep and difficult to cross as is possible. Scotiabank Place owning all the land around its arena that is used for parking strikes me as a pretty good moat.
And finally: Why is the focus of your blog on the parking monopoly and not the food monopoly? I admit that I don't know much about anti-competitive laws but wouldn't the same rules you mentioned in relation to the parking situation apply to the food situation as well?
Good questions. Here are some answers:
ReplyDelete1. When economist assume that the market will determine what is fair, they are usually assuming that there are a large number of buyers and sellers for an item, so that any one buyer or seller isn't powerful enough to influence prices. That way, you get competition, which leads to fair market prices. But if there isn't competition, then you can get some inefficient outcomes, which is why there are these "vague anti-competitive laws."
2. Scotiabank Place shouldn't have to rent out their land to satisfy some vague anti-competitive law. But if I came along and was willing to rent one of their parking lots for more than what their current tenant is paying, and they wouldn't sell it to me in order to maintain their parking monopoly, then that would be a problem because it leads to inefficient outcomes (i.e. overly high prices).
3. I guess I focussed on parking because I'm used to being ripped off on food, but not on parking. For Hamilton Bulldogs games in downtown Hamilton, you pay $5 because there are multiple lots competing for business (and admittedly it's probably also because there is not much demand for land in downtown Hamilton compared to other cities). But you're right that anti-competitive laws could be applicable to food providers at Scotiabank Place too. As far as I can tell, Scotiabank Place has multiple food vendors leasing outlets, so the laws I highlighted about a dominant market player behaving anti-competitively probably wouldn't apply. But it's possible the prices are so high because the food vendors get together and collude to keep them high; the Competition Act does have provisions that outlaw such cartels (http://www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/h_02760.html)
In response to number 2: Isn't that less anti-competitive and more about keeping their competitive advantage (not selling to someone who wants to buy)? Scotiabank Place were the ones who built the stadium, cleared the land, upkeep it, etcetera. Whatever company wants in on a slice of the pie didn't. But now since Scotiabank is suddenly capitalizing on its hard work, someone is allowed to complain if they won't rent out some of the land to their company? I don't think it's anti-competitive - it sounds like smart business. Sure they may get a big cheque up front, but they'd make more in the long run by keeping the land all to themselves.
ReplyDeleteI get frustrated when I hear about giant companies who complain that other giant companies have an unfair advantage. They wanted to work in a capitalist framework and they are - deal with it.
We don't need anti-competition laws for things like sports arenas and computer software. People need protection from outrageously priced fuel (since our society has decided it's important) and inaccessible health care, not the expensive parking at the hockey rink.
I'm not trying to attack you Dave, I just get frustrated by the priorities our society seems to have. How is it that we've spent all this time and money trying to protect companies from each other but we still can't educate our entire country at an affordable price; or provide health care for everyone in the country?
You raise a really good point about competition laws being a disincentive to build an economic empire. Parking at Scotiabank Place is a mundane example, but this is a real issue when it comes to drug policy; do we relax patent laws to allow competitors to come in and create cheaper, generic versions of successful drugs, or would less patent protection mean companies wouldn't put as much into R&D and we'll lose out on lifesaving drugs we would have otherwise discovered?
ReplyDeleteI'm not sure what the answer is. There's a trade-off between me getting gouged for parking and me potentially not having the hockey arena in the first place, and I'm not sure where the healthy balance exactly lies.
But I will stress that most staunch capitalists, such as myself, believe the capitalist system works because it creates an atmosphere of competition. In rare cases where you don't have that atmosphere, capitalism doesn't always work so well. But you're right that coming up with the proper fix can be difficult.
I'm not going to argue priorities with you. Health care, education and oil are more important issues than parking at Scotiabank Place. But that doesn't mean we should ignore a flaw in society if we can make things better. Competition laws aren't going to solve our health care problems, but if it means we pay a fairer price for a Snickers bar (http://www.cbc.ca/canada/british-columbia/story/2010/06/11/bc-chocolate-conspiracy-allegation-settlement.html), what's wrong with that?
Relaxing patent laws doesn't have to result in the cheaper, generic drugs being less effective or safe. If a company's drug doesn't do the same as what the benchmark drug does, and doesn't do it safely, then it doesn't get sold. Problem solved.
ReplyDeleteOf course if there's a flaw in society we should fix it. But there are much more important things to focus on than whether or not chocolate bars are priced fairly. It's not important. Chocolate bars are an unhealthy, unnecessary snack and their existence doesn't benefit anyone. I love them and yes, they are sometimes expensive, but that's a good disincentive to not buy them. People don't need cheap chocolate - they need cheap vegetables and fruit.
Even if it's an artificially inflated price it's still cheaper to buy a Snickers in Canada than it is to buy an organic apple. There's something wrong with that. And instead of pushing for more organically grown apples instead of mass-produced, pesticide and herbicide loaded crap, money and time are being wasted on a court case about whether an unhealthy chocolate bar is fairly priced.
Yes, I'm sure money is being invested into making organically grown produce more affordable. But even more could be spent if we stopped caring about unhealthy snack foods.
Obviously having anti-competition laws will result in cases like the Snickers one coming about. Anti-competition laws have to apply to all companies. But who is being harmed by high chocolate prices? Chocolate isn't a necessity, it's a luxury. High-priced luxuries are a fact of life. Whether or not they're being artificially inflated doesn't really matter to me.
I wasn't trying to arguing that there's a link between patent laws and drug safety. Rather, I was trying to say that relaxing patent laws probably results in drug companies making fewer drugs because it ultimately results in more competition and less profits.
ReplyDeleteOverpriced chocolate does hurt people who enjoy chocolate. Yes, chocolate isn't very healthy, but people still derive pleasure from eating it, which makes it a good thing.
There is nothing illegal about connecting parking to the event and it is not a monopoly-- you can go to another event that offers parking at a more reasonable price. This discussion is not recognizing the basics here- that is like saying that Loblaws has a monopoly on chicken they sell at their store...
ReplyDeleteA monopoly would be like hydro or water-- where that was the only one you can get -- not something like parking in a specific place.
Just park at the palladium auto park and all your problems will be solves
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ReplyDeleteIllegal parking is not allow so we should avoid. If you're looking best airport parking Manchester online then you're at right place.
ReplyDelete