Allan Fels is a brilliant spindoctor to most people reckon he’s done a good job on consumers issues. Unfortunately, the unprecedented dominance of big business in the Australian economy suggests otherwise.
Banking cartel has run riot
Unfortunately, it would seem that the reverse has happened under the Howard government, in spite of Allan Fels’s best efforts. Thanks to big banks being allowed to buy our largest fund managers in Colonial, MLC and BT, we now have one of the most concentrated financial sectors in the world. The cartel is creaming off almost $12 billion a year in profit and now comprise a ridiculous 30 per cent of the Australian stock market.
Giant grog companies have prospered
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Similarly, our four largest wine companies dominate the industry like no other equivalent “big four” in wine producing countries.
With South Africa a notable exception, what other country has a beer duopoly which controls more than 95 per cent of the market and throws off almost $1 billion a year in free cash flow.
And now the beer duopoly are moving on the wine game and in the case of Foster’s they have also become Australia’s biggest poker machine operator.
Telstra is running rampant
And what modern democracy has a dominant telco still enjoying monopoly returns from a 70 per cent market share and an extraordinary gross profit margin of 50 per cent?
Telstra constantly moans about the ACCC but Crikey cannot believe they’ve been allowed to get away with so much market abuse for so long.
To start with, get Telstra out of the pay-TV game. They should be told to sell Foxtel and stop using it for telephony defence.
A dominant airline company
It gets worst. Very few large nations have a dominant airline with an 80 per cent market share. When people talk about Telstra and Qantas being world leaders, they are referring to there unparalleled dominance of the domestic market and the financial strength that delivers.
Fels should have thrown the book at Qantas in 2001 when they went into full seek and destroy move by slashing prices and dumping capacity on the market. Now we’ve got a patently unacceptable system and a monopoly supplier to the lucrative business market. If Australia had a law that banned any company from having more than 50 per cent of a major market then this would have happened.
Major retailers just love John Howard and Felsy
The same applies to the grocery market. Coles and Woolworths have lifted their combined market share from below 40 per cent to more than 50 per cent since 1996. Is it any wonder the Woolies share price have almost tripled since John Howard was elected and the company now makes more than $500 million a year in profit, something that Qantas and Foster’s will also keep doing in the years ahead.
Thousands of small businesses – especially butchers, bankers, grocers and delis – have been smashed by the Coles-Woolies duopoly and Fels let them enjoy too much of the spoils from the Franklins break up.
Market power in the media
Don’t expect to see too much of this discussed in the Murdoch press because Rupert Murdoch has an unparalleled 65 per cent market share in the newspaper industry.
And it didn’t take Rupert’s The Australian long to trample on the Fels’ grave in an editorial last Wednesday.
Most of it was fair enough, giving a reasonably balanced report card on Fels’ term, but again they up the ante over pay TV, an industry in which News Ltd stands to make a motza if only they can get Fels to buckle:
“His other blindspot has been in industries being rapidly changed by technological advance, such as the television industry. The ACCC stubbornly refuses to believe pay-TV and free-to-air TV are part of one big industry available to all consumers and do not operate in separate markets. Here’s a case of the government-appointed regulator effectively limiting viewer choice in programming.
The next ACCC chair will have the opportunity to break free of his backward looking regulatory approach. Professor Fels has always emphasised the need for corporate accountability, now it’s the ACCC’s turn to aspire to international best practice.”
Give the ACCC more power
It’s time to give Allan Fels what the Brits and Americans call “the power of forced divestment”, meaning that when a dominant player such as Westfield or Qantas abuses their market power, they can be compelled by the ACCC to sell assets and reduce market share.
We also need to jail executives knowingly involved in cartels so let’s hope the Dawson inquiry comes up with something meaningful for consumers and that the next ACCC chairman is even tougher on big business.