Labor outlines plans to tighten competition policy and boost regulator

Tom McIlroy  Edmund Tadros
October 31, 2018
AFR
Federal Labor will take a tougher approach to corporate mergers  and the policing of anti-competitive behaviour if it wins power at the next election.
Labor’s competition spokesman Andrew Leigh will use a speech at the Australian National University on Wednesday to outline an approach that could include providing the competition regulator, the Australian Competition and Consumer Commission, enhanced investigatory powers and the ability to apply more severe penalties.
Dr Leigh will also call for tougher scrutiny of efficiency claims when anti-competitive behaviour is considered by the ACCC and for the impact of concentrated market upon workers, as well as consumers, to be taken into consideration when assessing market power.
In a lecture honouring former High Court justice and Whitlam government attorney-general Lionel Murphy, Dr Leigh will call for enhanced competition settings to be introduced, including taking into consideration the impact of anti-competitive behaviour on innovation, and to ensure “penalties are not treated as just a cost of doing business”.
“Australia has a competition problem: there is not enough of it,” Dr Leigh will say.
“Our industries are concentrated. Anti-competitive conduct is rife. Our consumers are treated poorly. Our markets show signs of weak competition. There has been a massive increase in mark-ups among large listed firms over the past two decades.”
Highlighting a lack of competition in a range of industries – from department stores, to banks, health insurance, supermarkets, airlines, internet service providers, newspapers, baby food and beer – Dr Leigh said the biggest four firms make up more than 80 per cent of the market in Australia.
“One standard measure judges industries as overly concentrated if the top four players control more than a third of the market,” Dr Leigh will say.
Industries dominated by ‘behemoths’
He will cite research he has conducted with Adam Triggs of the Australian National University looking at this measure across 481 industries that  found “more than half of Australia’s industries were concentrated”.
“It’s hard to think of many Australian industries these days that are not dominated by just a few behemoths,” Dr Leigh will say.
He will illustrate the impact of the market concentration by highlighting a list of major companies that have been reprimanded by the competition watchdog or the Federal Court over the past few years, including “Jetstar, Virgin, Arnott’s, Optus, Harvey Norman franchisees, Kogan and Unilever”.
“We’ve had Kimberly-Clark sell us flushable wipes that are about as flushable as a bathmat,” he will say.
“We’ve had Nurofen sell us a variety of different pain medications where the only difference was the colour of the box. We’ve had Heinz market fruit and vegetable products to children with six times more sugar than your average apple.”
He will argue that Australia’s markets are more concentrated than the United States in aggregate, and warn that commercial banking, petrol retailing and liquor stores are more than three times as concentrated as American counterparts.
Assessment by the World Economic Forum found Australia at 47th in a ranking of the extent of market dominance, placing between Ghana and Brazil.
Focus on ‘competitive process’
The speech will also link competition policy with efforts to address inequality in the economy.
“Inequality is not simply a function of taxation and government programs, important as they are,” Dr Leigh will say.
“Focusing more on the competitive process, the structure of markets and the incentives those structures create for firms will play an important role in reducing inequality.
“The functioning of our markets, the adequacy of our regulators and institutions, the structure of firms and the interactions between them shape Australian egalitarianism.”
Dr Leigh and Labor MP Julian Hill wrote to the ACCC in September asking the regulator to investigate the big four accounting firms Deloitte, EY, KPMG and PwC over allegations of cartel-like behaviour, warning of conflicts of interest between their audit functions and lucrative consulting businesses.