Most competitors prefer no competition. If a firm can keep the competition out, profits are sure to rise. But the worse thing about it is some governments prefer no competition too. With reasons ranging from preventing the ravages of competition from taking their toll to preventing accidents and traffic problems, the government tries to prevent competition. This is done either through regulation or direct involvement in the market itself. Most of the time, the effects are to the society’s loss. Reducing the number of firms in an industry decreases the supply of the good, thus driving up its price. Firms that remain enjoy both higher prices for their products and larger market shares. Consumers lose, suffering not only from higher prices but also from limited array of choices. The other group of losers is the firms who are barred from entering market. They are forced to go into low-paying pursuits for which they are not as well suited. This limit on competition reduces the total extent of mutually beneficial exchange.
It is without question that government plays an important role in making sure that a market works efficiently. Governments must enforce property rights and contracts, and develop infrastructure where the positive externalities of public goods cannot be captured by the private sector. Governments must take on the responsibility of protecting the rights of consumers, who are most often than not, highly unorganized and misinformed. On the other hand, it should be obvious to governments where their limitations start. Clearly the price of the good is one of the indicators. As soon as their regulations or involvement have started to reflect adversely in the prices, it should be time to rethink their strategies.
I don’t think governments realized yet to the full extent what Adam Smith said about the benefits of the invisible hand when he said, "It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest". At the rate at which most governments meddle and put up protectionist policies, Adam Smith may be tossing and turning in his grave by now.