There are “lots and
lots of cartels” in Australia, and many of them have been going on for
years, says Rhonda Smith, a former ACCC commissioner and senior
economics lecturer at Melbourne University. People might think that
because of their apparent instability – they rely on a large level of
trust between parties – cartel arrangements are “likely to be
short-lived.” But the reality can be quite different.

They do tend to break down, but then there’s a price war, “everyone
realises how nasty (ie costly) competition is,” and they get back
together again.

Australia is particularly susceptible to this behaviour, Smith told
Crikey today, because it’s a concentrated economy with most of the
markets having only two or three main players which “makes it much
easier to collude.” It means there’s a “greater tendency to see a
mutual advantage.”

Of course, having a small number of players
isn’t the only ingredient for the creation of cartels – it’s a
“necessary condition but not a sufficient one.”

So will the new
immunity provisions help unmask existing cartels? Yes, predicts Smith,
but the real question is whether they’ll discourage the formation of
cartels in the future. And it’s “not beyond the realms of possibility”
that this will happen, she says, because it would help generate an
environment of suspicion in the already unstable cartel world. “You’d
want to have a lot of confidence that other members of the cartel if
they’re disgruntled” aren’t going to go to the ACCC. After all, it’s
“not a bad means of payback.”