Passing Trade

12th August, 2006

The Undercover Economist – FT Magazine

The coffee-chain cappuccino is an excellent barometer of pricing, since it is, unlike a salad or a plate of spaghetti, a uniform product. The Economist magazine has taken advantage of this fact by constructing a “Starbucks tall-latte index” to check currency valuations, but budget constraints for the humble Undercover Economist meant that my own investigations took me no further than Watford Gap.

Watford Gap is the oldest motorway service area (MSA) in the country. After a long wait in the queue there, I purchased a Costa Coffee cappuccino – which, apart from being 10 per cent more expensive, was identical to the high-street product in all respects – and something called a “ham and three cheese tostato”, which was quite disgusting and carried nearly the same premium. Most travellers will recognise the distinctive motorway experience of high prices and low quality, but they may not know who is to blame. Underneath the elevator music and sad Formica tables for the single traveller lies a remarkable government campaign, as old as Watford Gap itself, to make MSAs as grim as possible.

Naturally, the companies that provide motorway services could do a better job and charge less. But anyone who expects that result from the benevolence of the butcher and the baker will be disappointed. Companies give us what we want only when their competitors are doing likewise. MSAs do not pit Starbucks against Costa because they know that that sort of intense competition, while good for customers, will drive down prices and lower profits.

Competition between MSAs could fix all that, and this is where the government campaign against the motorist comes in. First, it is almost impossible to build a new MSA. Entrepreneurs must first persuade the local planning authority that there is a need – as if anyone would be tempted to offer roadside snacks when nobody was buying. They must distance themselves from competitors. (One government agency, the Office of Fair Trading, tries to stop such attempts to limit competition, but the Department for Transport makes them mandatory.) Then they must secure permission from the local authority, whose constituents are the last to benefit from a vast car park in their back yards. Finally, they must build slip roads and maintain free car parks and toilets all year round. Small wonder that despite the sky-high prices, there are few new entrants.

Even stranger is the desperate attempt to deny motorists information on the quality of the product. No information about the MSA can be signposted on the motorway until half a mile before the junction; even then, only the company name can be listed, which means the big players have been forced to resort to changing their names to incorporate their strongest offerings. Instead of Moto and RoadChef we have “Moto M&S” and “RoadChef Costa Coffee”.

None of this matters much. You could always pack your own sandwiches. But it is a lesson. Advertising is often denounced as garish commercialism or, worse, insidious mind-control, but move to the MSA world where advertising is illegal and you will find yourself wishing for the sight of a familiar logo. When advertising is impossible, why provide anything worth advertising?

Regulations on business are often supposed to protect the rights of consumers. Sometimes they do. But consumers are the first to suffer from incompetent regulations – if they ever get to the front of the queue.

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