The boss of Australia’s competition regulator has called for an overhaul of merger laws in order to prevent increasing market powers that are having a damaging effect on small businesses and consumers.
In his annual address to Law Council of Australia’s Competition and Consumer Workshop, Rod Sims, chair of the ACCC, said many markets are dominated by a small number of providers, including banking, supermarkets, mobile telecommunications, internet service provision, energy retailing, gas supply and transport, insurance, pathology services, domestic air travel, internet search and social networking services.
“Without action, market power in Australia will become further entrenched, and will certainly not reduce,” Mr Sims said.
“Small businesses generally are becoming increasingly reliant on a few buyers to access markets for their products and a few sellers for their key inputs. This can damage their innovation and their productivity.
“Many small businesses and farmers are largely reliant on Coles and Woolworths to access grocery shoppers. As recent history has shown us, this power imbalance places small businesses and farmers in particularly precarious positions with consequent damage to our economy.”
He added that market power is having effects on the broader economy and can also “contribute to economic inequality by promoting the interests of the few with power over the interests of many”.
Preventing anti-competitive mergers is crucial
To prevent further loss of competition, Mr Sims said it’s vital to control mergers that might be anti-competitive. Past examples he called out include rail container freight competitors going from two to one, the Vodafone/TPG merger lessening competition in the telco space, and AGL’s acquisition of Macquarie Generation leading to higher power prices. He also pointed out Google, Apple, Facebook and Amazon and said specific changes are needed to deal with acquisitions by digital platforms.
Australia, he said, is unlike other countries in that the ACCC does not approve mergers — instead, it needs to go to persuade the Federal Court that the merger might lessen competition.
Mr Sims said that he is aiming to start “a key debate that, at one level, discusses the appropriateness of our merger control regime and, at another, asks whether we want an open, innovative and competitive economy”. He named three ways the current regime is not fit for purpose:
- the requirement that, to prevent an anti-competitive merger, the ACCC must go to court and prove that future anti-competitive effects of an acquisition are “likely”;
- there is insufficient focus on the structural conditions for competition;
- the merger control regime is skewed towards clearance;
- there is a gap in our law in relation to acquisitions by digital platforms.
Mr Sims said he hopes the debate will be open to all — not just large businesses — including small business groups, farming organisations, consumer groups, academics, community groups and competition law practitioners.
This is not the first time the ACCC has spoken out on market power. For example, Mr Sims made it the focus of another speech last October. Back in June, the ACCC introduced new collective bargaining rules to allow SMEs to group together when negotiating with companies that buy their products.