For misconduct, Sims wants to hit companies in the share price

ANDREW WHITE
PERRY WILLIAMS
FEBRUARY 27, 2019
The Australian
Competition regulator Rod Sims wants penalties for corporate ­misconduct to be big enough to trigger share price falls and says Australian courts are making it too difficult to prove consumers will be worse off as a result of corporate mergers.
Mr Sims has also flagged two legal actions against the banks as early as this year following the Australian Competition & Consumer Commission review of the mortgage industry and extra funding from the federal government for monitoring of the financial services industry.
The ACCC chairman said there was a bias to consolidation of industries in Australia and too much faith in market forces to solve problems caused by a lack of competition in concentrated ­industries.
“We are increasingly concerned that the bar for establishing a likely substantial lessening of competition is being raised to a height that is failing to protect competition and ultimately consumers,” Mr Sims said in a speech in Sydney yesterday.
“The law prohibits mergers and agreements likely to substantially lessen competition.
“These prohibitions are there to protect the competitive process in our markets.
“It is important that they can be effectively enforced.”
Mr Sims said the level of concentration in an industry and the health of the economy was at stake when the ACCC challenged a merger on the grounds that it would lead to a substantial lessening of competition.
“There seems, if anything, a current bias to excessive consolidation; to fewer firms in each ­sector,” he said.
“As a community we need to question whether this is the outcome we want.”
Mr Sims said the ACCC wanted a more favourable interpretation of rules to protect against a substantial lessening of competition and would try to simplify cases it brought to the courts to focus on the potential harm of some mergers. If this did not succeed, it would consider asking the government for changes to the law.
The comments came as Mr Sims outlined his priorities for the year to the Committee for Economic Development of Australia.
It included a focus on consumer protection guarantees for big-ticket household items such as whitegoods and cars, and customer loyalty schemes that collect and use data.
Advertising services on digital media platforms and subscription services would also attract the ACCC’s attention.
Mr Sims said that following the passing of new consumer penalty laws last year he expected to see courts imposing fines of $100 million or more that would make investors and directors take notice. Mr Sims said companies saw fines of $5m or $10m as “loose change” and they had no impact on the share price.
“We need penalties that mean that when the penalty is announced, the share price takes a dip. At the moment, the share price doesn’t take a dip, it doesn’t get ­affected at all.”
The new consumer law ­penalties allow courts to fine companies the greater of $10m, three times the benefit to the company or 10 per cent of turnover and Mr Sims said the last category could see penalties of more than $100m.
“I am not for a second saying there is anyone on the company board that wants to break the law,” Mr Sims said
“The question is how much does it matter to them to make sure they don’t, because the incentives are all the other way. We have to make it matter enough.
“I am not someone who is here to talk about corporate culture. I am someone who is going to talk about punishment that will move the culture. We are into punishment.”
Mr Sims said he expected to bring two or three criminal cartel cases this year and said at least one bank was likely to face legal action over a competition issue after the regulator received $38.5m to set up a special banking unit.
The banking industry was a “fairly cosy oligopoly” that did not compete on price.
Last year it launched a cartel case against ANZ, Citigroup and Deutsche Bank over an ANZ institutional share placement in 2015.
Mr Sims said the focus for court actions would be conduct that may contravene the new misuse of market power and concerted practices provisions.
“I am confident that we will bring proceedings under these provisions this year,” he said.
The ACCC expects to bring more proceedings this year against the commercial construction sector following its current prosecution of the CFMEU over steelfixing and scaffolding issues.