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Thoughts on oligopolies


In an article published on Inside Small Business - Why 'anti-big business narrative is wrong":COSBOA , COSBOA stated that it does not have an “anti-big business narrative”, however there is “anti-dominant oligopolies campaign” . This clarification in response came in response to an editorial in the Australian Financial Review. CEO, Peter Strong commented “It is due to extreme market dominance that the boards of dominant businesses have no motivation and no reason to innovate. They do believe they are innovative but that is delusion based on power not fact. In the end, their boards act purely to increase profit and maintain dominance by hitting hard on the SMEs in their large supply chains, rather than doing anything innovative. There is no reason for the oligopolies to foster imagination and reward those who do things differently and better. They behave in this way as a result of the failure of competition policy.

“These oligopolies increase market share by misuse of their market power through bullying, price discrimination, and covert manipulation of government policy – not by being particularly innovative or clever.”

There was some extremely thought-provoking feedback received from the public and from members in relation to the area of competition and competition policy, with one member noting that there are many oligopolies other than supermarkets that are damaging to small and medium business interests. These include:

  • Telecommunications - with Telstra and Optus manipulating government policy and ACCC efforts to increase transparency on service provision by covert alterations to the Telecommunications Consumer Code

  • Road Freight - with both Toll and Linfox implicated as having worked with the TWU to increase wages and compliance costs such that they made it almost impossible for small trucking enterprises to compete – and subsequently resulting in the demise of the ‘Truckies Tribunal’)

  • Insurance – with IAG and Suncorp dominating the domestic insurance market and dictating prices for service providers under complex claims administration (i.e. motor vehicle repair and home repairs)

  • Private Health – with Medibank Private and HCF growing strongly in a market that seems to be able to increase consumer costs willy nilly

  • Domestic airlines – Qantas and Virgin effectively having managed to shut out the numerous start-ups that have tried to secure market share – much of it done by shutting out other airlines from the attractive space at Australia’s capital city airports.

  • Banks – current prudential requirements and retail banking policy effectively shuts out innovative providers. While much of the prudential requirements for Australia’s finance industry is designed to protect the integrity of our banking system, some of it also appears to be about protecting the small number of incumbents.

The member noted “the focus on supermarkets is very narrow and risks alienation of those businesses that are being impacted outside of the supermarket industry. COSBOA needs to focus on a multiple-industry focus as this is a pervasive problem”.