Rod Sims: Australia needs a law against ‘unfair’ behaviour by companies

FEBRUARY 14, 2019

Corporate culture is the current focus of debate.
This has been driven by stories across many sectors, most recently banking, of companies treating their customers terribly.
What is at stake is more than many poor customer experiences, as appalling as they are, but a loss of faith in our market economy.
As The Economist said last year: “Capitalism has suffered a series of mighty blows to its reputation … this loss of faith is dangerous, but it is also warranted.”
There is much work to be done to restore public faith that markets can operate fairly, effectively and to consumers’ benefit.
It’s clear that part of the answer lies in reforming corporate culture. The problem is that the debate around corporate culture is misinformed.
This is because the debate often focuses on culture as if companies determine this in a vacuum. This is not so. Company culture develops in the context of the prevailing laws and norms.
In the early 1970s, for example, the main business organisations and leaders bitterly opposed laws being introduced to outlaw cartels and behaviour that misleads consumers, as such behaviour was then rife. Today, and with these laws now in place, no company director would say such behaviour is appropriate.
The financial services sector clearly stepped well outside of laws and norms, but the Hayne royal commission hearings and recommendations should make this much harder to do in future.
It should be recognised that companies exist to make profit for their shareholders. But the profit motive only works to the benefit of consumers when there is strong competition or appropriate regulation, and where there are well-informed consumers.
Both are crucial if public confidence in a fair and effective market economy is to be regained.
In this context, as the competition and consumer regulator has been working on three main fronts.
First, the ACCC has been an aggressive enforcer of the law and will continue to be so. Whether it is taking action alleging criminal cartel activity, as we have done in relation to some banks, other international and Australian companies and even the CFMEU, or taking action against Ford, Heinz, Telstra, Apple, Optus and Meriton and many more for misleading consumers. Such action sends a vital compliance message to company boards and executives across Australia and beyond.
Second, we need effective laws. The ACCC has successfully advocated for necessary law change. We now have a workable misuse of market power law (section 46), and a law against concerted practices — both necessary changes. From November 2018, significantly higher penalties now apply for breaches of the Australian Consumer Law.
The government recently gave the ACCC more funding to pursue alleged breaches of section 46 and the new concerted practices provisions, and as a result we will bring more cases before the courts. Clearly, with more money the ACCC can do more.
Third, if we are going to improve competition in our markets, we must have policy reform that lowers entry barriers and exposes more sectors and companies to stronger competition. The ACCC is engaging in increased advocacy and policy work with our detailed market studies, which have taken us to the beef and dairy sectors in agriculture, insurance in northern Australia, motor vehicles, energy and digital platforms.
In financial services, since May 2017, we have had a continuing proactive role. A cosy banking oligopoly is surely at the heart of recent problems, so we must and will find ways to get more effective competition in banking.
But more is needed, if we are to ensure that markets are working effectively and consumers are treated fairly.
First, we are concerned that the approach to evidence required to establish that anti-competitive agreements or mergers breach our laws is failing to adequately protect competition and consumers. There is, for example, too much faith in the capacity of market forces to overcome concentrated market structures, and too much weight given to the self-interested evidence of company executives involved in the conduct.
Second, the ACCC will continue the debate about the adequacy of laws against companies engaging in ‘harsh and unfair conduct’ towards consumers.
The ACCC recently lost a case against Medibank, where the Federal Court found: “ … Medibank acted harshly [against consumers]. And I am also prepared to conclude that it acted unfairly. But this is not enough to establish statutory unconscionability.”
The federal and state ministers responsible for consumer law have recently discussed whether, as in the US, Australia needs a law against “unfair” behaviour by companies. The ACCC will be an active participant in this debate.

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