In all the debate about the changes to Section 46 of the competition legislation (and the weird over the top panic by the BCA and a few of its members) we seem to have forgotten the bigger picture and the best parts of the Harper Review.
Several commentators have recently highlighted the importance of the other recommendations** from Harper including human services, for sale transport and intellectual property. These commentators are the Treasurer Scott Morrison, pharmacy the Chairman of the Productivity Commission Peter Harris, here the Small business Minister and Assistant Treasurer Kelly O’Dwyer, the Chairman of the ACCC Rod Sims, a past Chairman of the ACCC Alan Fels, Ian Harper himself, the COSBOA Chairman and many others. Not a bad group.
So what this brings home to me is that our need for an Effects Test goes well beyond supermarkets. It’s also about aged care, child care, roads, optometry, education, general health care, etc. An Effects Test is the way the ACCC can make sure competition is fair, transparent, rigorous and consumer benefiting.
So is the BCA and some of its members terrified that the future of competition might NOT involve duopolies and domination by a few across all sectors of the Australian economy?
I have been reliably informed that about 50 years ago economists were all abuzz about having very few companies running businesses right across Australia and how that would be fantastic and that the savings to be made from economies of scale from mega businesses would be the nirvana that consumers were seeking. Thus we have Coles and Woolworths and some of the most expensive groceries in the developed world. Thus we have two insurance companies dominating business, AIG and Suncorp, and as choice of insurance drops watch costs go up. We have one company that dominates telecommunications and we have one of the most expensive and slowest systems in the world. We have big companies now dominating a range of other sectors – electricity, optometry, logistics and transport. Thus we have retail diversity dropping and our base culture changing as the big chains and big landlords swallow up town centres and remove choice.
Our productivity is also lower than it should be as dominant businesses put unfair pressure on the innovators in medium and small business. These suppliers, growers, producers and manufacturers cannot find anyone else to supply and just have to tug the forelock to Coles/Worth and either close or live a lesser life (Am I too melodramatic? Yes – No? Ask someone in the supply chain to the duopoly who have lost everything including their health – go ask.)
Nice failure economists from 50 years ago. But hang on a minute there are still economists alive today who think the same thing, and they are under 60. What happened? Oh yeah the BCA and the SDA union.
The fact is that economies of scale disappear once dominance is achieved as normally the biggest most dominant become lazy or unable to manage their huge companies (proven last year when Coles was well and truly pinged by the ACCC). Mega dominance isn’t good for anyone except those who get mega salaries.
The future of any economy is based on competition between many not competition between two. (Excuse me while I just express my ongoing incredulousness with the fact that while 90% of people get this fact the 10% who don’t seem to get heard, I suppose it is because they are the richest 10% plus the biggest union? The ruling class?)
According to Harper the areas of concern are indeed important, to quote Ian Harper from his CEDA address in April 2015 – “In the area of human services, we discuss how to get suppliers to respond to user needs and preferences in areas where traditionally users have received a ‘standard offering’. So in addition to productivity benefits, this offers greater choice, life satisfaction and control for Australians. The human services sector covers a diverse range of services, including health, education, disability care, aged care, job services, public housing and correctional services.”
The reason the ACCC wants and needs some strengthening of Section 46 is for the above reason. Having two companies dominate the above sectors cannot be good. How will there be “greater choice, life satisfaction and control for Australians” if we end up with plain labelled aged care? How will older people and their daughters and sons pick an aged care home when the homes are all the same?
The aged care market is becoming more concentrated as organisations like BUPA (member of the BCA) get larger and larger. The threat to choice is real.
Let’s move on from the blood spilling and personal attacks from big panicky dominant businesses and focus on the bigger issues. Or are they scared of competition? Yep they are – just saying.
*And it of course takes two duopolies to change a light globe but the better question is “will the light globe be one that saves money for the company or adds to the ambiance of the aged care facility?” Bet you it’s going to be a focus on profits not the needs of bed bound old people.
**One of the few areas where I disagree with Harper is about giving pharmacy to Coles and Woolworths. They are so dominant now that the end of the community pharmacy would see our community culture changed even more. We would see retail diversity drop once again and see our health needs being run from boardrooms in faraway places not by local people in their own community who value their personal reputation and value each customers’ health. We can free up pharmacy when we free up retail.