Revelations about supermarket pricing have appropriately focussed attention on the need to enhance competition in concentrated markets. Other markets ranging from technology to beer have evidenced like problems. We suggest that the process will be helped significantly by further amendment of the Competition and Consumer Act 2010 to better allow the ACCC to properly pursue these issues.
Our suggestions which are summarised here, have been detailed in submissions to several competition inquiries:
Specifically, we suggest amendment as follows:
- Require explicit examination of the definition of the relevant market for any deliberations and determinations. This should cover both product market and geographic market.
- Introduce into the legislation allowance for joint (or collective) dominance, so that where two or more legally independent entities act together in a particular market as a collective entity, this can be examined and addressed.
And, recognising, Boulding’s principle, viz. if it exists it is possible, it should be stated that our proposals do operate very successfully in European jurisdictions.
Market definition and dominance
Back in May 2020 Minister Craig Emerson did actually start down this track. He introduced a bill into parliament clarifying that the prohibition of creeping acquisitions that substantially lessened competition in a market, applied not just to the national and state markets but also to local markets. He provided an amendment that simply changed “a” market to “any” market, ensuring the prohibition on creeping acquisitions covered local markets.
This was indeed a major improvement and recognised the point made earlier regarding market definition. We would argue that this amendment could today be further strengthened to not only ensure that creeping acquisitions apply to local as well as national markets and allow the ACCC to examine that, but to oblige the ACCC to explicitly review the appropriate geographic market coverage in any investigation.
One of the reasons why geographic markets are often ignored in merger cases is a practical one such that there is a limited time to investigate mergers – but if it is a creeping merger then the ACCC should already have been considering the smallest markets that the potentially acquired firm operates in.
Or, if there is a merger between two major supermarkets or breweries or chains of hotels and so on – where many geographic markets have to be considered – the ACCC could consider the most likely anti-competitive market and stop the merger on this basis to make the merger conditional on making the acquirer sell to other competitors. But recognising collective dominance behaviour between legally independent entities in such markets is also crucial to enhancing ACCC effectiveness.
Coherence and integration
We also argue though, for coherence in this process. There is a danger in a world of many markets of inconsistent polices. So, consideration of a new separate integrative Planning Commission or a reformed Productivity Commission with a wider added integrative mandate, should accompany these market definition and obligation reforms so that they and other reforms can be rendered coherent in their total effectiveness.
Put aside the currently contested reform of the Reserve Bank. In the long run, these further reforms of microeconomic planning, policy and productivity institutions will matter even more. And putting such policies more in touch with real Australia, where the impacts of concentration in everything from beer to airlines is very evident, will be a big advance and, dare we say, electorally appealing.
The current Government is establishing many reviews and inquiries in many individual areas. But it lacks a proper mechanism devoted to adding up and integrating the results. Normal bureaucratic processes, especially after the weakening of the Australian Public Service over the past decade, do not do this or do not do it well enough. The ‘vision’ thing is absent.
And, especially, we must also ask whether the policy integration will also be conducted in a considered and open and balanced way with input from major stakeholders and the wider community on that integration of policy? At present the answer remains no, and this needs to change. There is too much official secrecy.
If this need for better transparency is accomplished, a genuine, coherent and informed vision for the future of the country can better emerge. In this way, individual industry and policy reviews can made be more meaningful, matters of complementarity and conditionality addressed, and public confidence built.
We indeed had this once during the micro-economic reform era through the Economic Planning Advisory Commission, but this was abolished by the incoming Howard Government which did not recognise that the union influence that concerned it had just been neutralised by Paul Keating having just converted the former Council into a Commission, which then helped form the Productivity Commission. But the integration was then lost.
The way forward
The current Treasury Competition Review due to report next year must include these market definition and obligation proposals, and consistency and transparency suggestions, in its conclusions.