Don't let the big players water down enforcement of competition policy

The Business Council’s proposal for the Trade Practices Act and the ACCC look rather innocuous at first glance. New boards and charters, and inspector for complaints, the option to take mergers directly to the Australian Competition Tribunal, and earlier consideration of public benefits - it all seems a bit boring really.

In fact, the BCA’s proposals constitute one of the most radical platforms for undermining strong competition law and muzzling the regulator that the Australian public is likely to see. Big Biz, by endorsing (weakly) criminal sanctions, have distracted public attention from the more self-seeking aspects of their proposals

A careful dissection of only a few items in the submission to the Dawson Review provides the flavour.

The BCA proposes a proliferation of new bureaucratic oversight structures - it looks like Barry Jones wrote this model! These new structures are to have oversight functions, determine priorities, review priorities, re-evaluate actions, reassess decisions, investigate the Commission, oversee implementation - basically a never-ending process of reconsideration, reassessment, re-evaluation, reanalysis and red tape.

That’s called muzzling the regulator, and it’s not prettier than any other attempt at regulatory capture. These new bureaucratic structures would ensure that the ACCC is emasculated in terms of setting the agenda for the protection of consumers and small business and considerably slowed down in its pursuit of those who misuse their market power.

While trying to nobble the regulator is a predictable strategy from the big end, there are some unsavoury surprises in the submission. The BCA proposes to amend section 50 so that business efficiencies and public benefits are considered when a merger is still at stage one. An unwary reader might think this is a very fair proposition.

It’s not. The primary consideration in our competition law is whether a merger would substantially lessen competition. Putting things like business efficiencies on an equal level makes it much more likely for mergers to proceed even if competition and consumers are damaged. That’s not the worst part. The ACCC’s initial process in assessing most mergers is carried out in private. It’s only when the ACCC believes that the problems of reduced competition cannot be overcome - about 2 per cent of merger proposals - that the authorisation process comes into play, requiring transparency and public awareness. The BCA is basically saying that the authorisation process can be bypassed, that mergers that lessen competition can be addressed behind closed doors, and that the public and other stakeholders have no right of access to scrutinise their claims of public benefits and business efficiency. Bullet one in the transparency of our competition law regime.

In addition, by seeking the option of bypassing the Commission and taking a merger directly to the Tribunal, the BCA would put the full consideration of a major merger into a quasi-judicial forum. People don’t front up to the Tribunal without their QC’s in tow! Clearly, this is the path that really big competitors want to use - read the big banks and oil companies for starters, and anyone else who’s got the money to spend on expensive silks. At the moment, putting a view about a merger is easy - members of the public, consumer organisations, smaller businesses such as suppliers all have an opportunity to comment and be heard when a merger which will lessen competition is being considered. These groups help identify what constitutes legitimate public benefit and whether big business claims of public benefits and economic efficiencies stand up to scrutiny. Most, probably all, of these smaller participants would be locked out of a process that went straight to the Tribunal - the formality is too formidable and the costs are prohibitive. Bullet two - the transparency of our competition law regime would suffer a fatal blow.

If there is some good reason for weakening the competition law and the regulator, one might not object; but the BCA’s basic argument for these changes is a fallacy. They claim that such anti-competitive mergers must be facilitated to enable companies to compete globally. The empirical evidence is the exact opposite. Companies who are good global competitors grow up in countries with strong competition laws and strong enforcement. That’s not surprising - they’ve learned how to compete at home and they take those skills into the global marketplace. Big companies only account for about 50 per cent of Australia’s exports. Big is not the issue for success abroad, being good at competition is. Which is a very good reason to strengthen the Trade Practices Act and the ACCC’s enforcement of it.