Regulation of free market through standards

The aim of this post is at discussing whether the introduction of standards can hinder the rules of a free-market economy and up to what point. We should distinguish among two different types of standards, that we call procedural and material standards.

A procedural standard defines how a price has to be defined, considering only its definition without taking into consideration the figure involved. Those standards become quite important when considering complex product or services to be publicly sold, such as telecommunications or electricity tariffs, that sometimes are presented in a way so complicated that becomes difficult, or at least time consuming, to compare them. in those case a standard definition of the price, based on a weighted average, could help the buyer in a first comparison without limiting the possibility of differentiating the price structure in any possible way. This kind of standard is a positive contribution, mainly for general consumers, and does not create any hinder to the market freedom.

Technical standards can be considered among the procedural standards, they are important as a mean to guarantee the reliability and quality of a product, provided that they are only a standard. The attempt to legally define the technical characteristic of a product or a plant, with the exception of some safety prescriptions, is a source of infinite bureaucratic problems.    

On the other side, a material standard aims at defining a standard price, without saying that this is an obligation but only as reference parameter or as “suggested price”. This is normal procedure for cost control, but now we are considering whether it could be extended to the general market. By this way, we are in some way conditioning and disturbing the market freedom and there is a substantial possibility of a negative impact, to be considered case by case. As general rule, material standards should be used only in particular cases.


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