Is Competition policy decided by a few mega businesses and their union?

By Peter Strong . On 19-Feb-2016

The development of better competition policy in Australia is vital to our future.  It is vital for the consumer to have diversity in the retail sector and even more vital for rewarding innovation and improving our productivity. Without an increase in productivity our standard of living will fall and continue to fall.

This is an election bellwether for the Turnbull government. If it bows to the wishes of some big bullying businesses then the small business community will know it is not a government for small business. That will have ramifications.

For too long our competition policy has been decided by laissez faire economists and the boards of Wesfarmers, ailment ailment Woolworths and Telstra.

This was made worse with a laissez faire competition regulator (prior to Rod Sims becoming Chairman of the ACCC) allowing the biggest businesses to bully, cheap coerce and destroy many other businesses in our retail supply chain.

Laissez-faire attitudes and policies have created an environment that is all laissez with not much being fair.

The great majority of people associated with competition policy know it must change. The independent report on competition laws headed by Professor Ian Harper (known as The Harper Report) recommended changes to Section 46 of the relevant Act. The majority who agree for change includes: more than 96% of businesses and business associations; the Chairman of the ACCC and the six ACCC commissioners; Professor Alan Fels (a past ACCC Chairman) and many academics. The associations that support the changes include the Council of Small Business, hospital the Australian Chamber of Commerce and Industry, the Master Grocers’ Association, the Australian Motor Industry, the Australian booksellers Association, The Australian Hotels Association and many more.

Politically the great majority of back benchers in the Liberal party support the change, many in the ALP also support the change.  The Nationals Party also support the change and indeed forced the Turnbull government to revisit the issue after Abbott stopped supporting the changes.

Most business people believe that the Harper recommendations do not go far enough.

It is just a handful of big businesses believe there is no need for any change. The only industry group that is against change is the Business Council of Australia, but not all their members support the decision and most do not see the issue as important. The companies that are against the change are: Wesfarmers who own Coles and Bunnings; Woolworths; and Telstra. These are the biggest and most dominant businesses Australia has seen and they are panicking. Why? The fact that the biggest businesses don’t want change should be enough evidence to support change.

We went along with the proposed changes even though they did not go far enough, in the end we decided to accept the independent reviews findings and move on.

The biggest businesses named above refused to accept any change and threatened the Abbot Government with dire consequences if the changes went through. They sent secret letters, had covert meetings and made threatening phone calls to Abbott and his closest advisers.  Abbott caved in and declined to change section 46.

That is a warning signal to Australian industry. Will Australia’s business and economic policies be decided by third world practices?  Where big businesses and the wealthiest and most powerful threaten a government and the poor third world government has no choice but to do as they are told. The behaviour of Shell oil in Nigeria in the 1990s where the government used armed forces to protect Shell from being made to pay fair taxes is very similar to the behaviour of Wesfarmers in Australia in 2015.

This is not a big business versus small business war.  This is a few of the biggest businesses Australia has ever seen versus the rest of the business community.

A decision must be made by the Treasurer on Section 46. This cannot wait until after the election.

Those big businesses argue that changes, known as an effects test, will hamper innovation and create a lawyers picnic with litigation and confusion impeding good business.

The fact is the use of similar regulations in the Australian Telecoms Act has not created a lawyers picnic and indeed these powers have only been used 5 times since they were introduced in 1997, to the betterment of competition in that sector.

Most countries have an effects test of some sort in place. For example the countries that have signed up to the Trans Pacific Partnership have an effects test, except for New Zealand. The most innovative countries have an effects test in place.  There is a strong argument that the use of the effects test in the 1980s in the USA to break up the monopoly that Microsoft had become helped create the environment for the development of the iPhone among other innovations.

Our fear is that in appearing to be conciliatory and willing to consider all options we just surrender to the current situation.  That has dangers for the future of choice for consumers and the future of productivity.

What happens if a few companies get their way? What about the future?

If any new oligopoly is created by market forces and consumer demands then fine.  If it is created by regulation that fetters the regulator than that is not fine.  We could end up with one or two corporations owning and controlling aged care, road transport and many other sectors.

This is also about productivity. As seen frequently in the media the suppliers to the big retailers are under constant attack, they struggle to grow and the forcing of generic labelling of their products inhibits any chance to grow, provides no reward for innovation. The biggest companies can act like bullies due to their size, they have become this big due to a lack of an effects test.

Let’s agree on the current proposals from Harper and then agree to meet and consider what else can be done, but importantly let’s be honest and transparent.

About the author

Peter Strong

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