With Chris Bowen apparently committed to a serious approach to criminalising cartel behaviour by dropping the “dishonesty” requirement from the draft legislation, the Government shows what will be for business worrying signs of actually being serious about strengthening competition law in Australia. It’s only a few days since Bowen committed the Government to introducing a “creeping acquisitions” provision to the Trade Practices Act.

One of the most significant issues facing Australian consumers is the apparently remorseless tendency of Australian markets to oligopoly. Grocery and variety retail is dominated by two companies. Petrol by a handful of multinationals. Air travel by three companies. Oligopolies abound. Print and broadcast media, telecommunications, banking, taxis — they’re everywhere. The problem is just as bad or worse for producers up the supply chain.

Nor should we forget them malign influence of oligopolies on the policy process. A handful of large companies, with interests closely aligned, can wield significant influence on politicians.

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We have the curse of a medium-sized economy. We’re not the US or Europe, big enough to support numerous healthy competitors in markets with hundreds of millions of consumers. But we’re not New Zealand, which is so small it has no choice but to allow oligopolies and duopolies to flourish.

Oligopolies, as any Year 11 Commerce student can tell you, enable companies to achieve economies of scale and minimise overheads. But what proportion of those benefits are passed on to consumers in markets with reduced competition is never clear. The profits of our banking sector, to cite only the most egregious example, suggest not much.

This is a key task for the ACCC — working out, on a case by case basis, where the benefits of scale are outweighed by the risks to competition. While the TPA enables the ACCC to balance public interest against the negative consequences of anti-competitive behaviour, it’s not like we’ve consistently got the balance right — certainly not in groceries, not banking or telecommunications. It’s usually not the fault of the ACCC, which is our most aggressive and successful regulator, but which can only use the TPA it is given. Nor does it help that many Australian industries have been well established oligopolies for decades.

Nor is the quality of competition policy debate helping. Since the Hilmer reforms, some competition policy experts – helped, no doubt, by being paid considerable sums by large companies – have drifted toward a greater emphasis on proprietary rights in arguments over infrastructure access. The likes of Henry Ergas advocate approaches close to laissez faire deregulation in dealing with market concentration. At the other end of the spectrum, an academic like Frank Zumbo seems to have a downright punitive attitude to large companies.

Neither approach is helpful in the task of working out how we get the benefits of oligopolies, but aggressively regulating them or preventing them where the only result is less competition, higher prices and poorer products for customers.

The previous Government, which had the benefit of the Dawson Review of the TPA, squibbed serious competition law reform – ducking criminalisation of cartel conduct, creeping acquisitions, and cease and desist and strengthened investigatory powers for the ACCC. Bowen, to his credit, has already backed two of those.

He needs to further strengthen the ACCC’s powers of investigation and arm them with a full suite of compliance options, including ones to immediately halt damaging conduct. Unlike most Australian regulators, the ACCC under both Allan Fels and Graeme Samuel has shown a willingness to use its available powers.

It should be fully armed to fight what is an inbuilt tendency for Australian business to grow bigger without passing the benefits on to consumers and other producers.

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Peter Fray
Peter Fray
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