Suppose you open the first florist in your suburb. As a local trader, you pride yourself on being part of the community. Like most companies, you rely on the internet for much of your business, so you go online to see how you might improve your digital presence.
That’s when you notice something amiss. A mystery florist is showing up in your suburb too. The search results boast that they have ‘the finest quality flowers’ in the suburb, and crows about its ‘fantastic local service’.
The trouble is, they don’t have any local presence at all. In fact, the mystery florist operates out of large warehouses and has thousands of webpages to create the impression it’s a local business in suburbs across Australia.
That’s what the Australian Competition and Consumer Commission uncovered last year. As a result of their investigation, several national online retailers already admitted to gilding the lily and making misleading representations about being local florists when they were nothing of the sort. By giving the impression they were based in the local community these larger online businesses were unfairly diverting business away from legitimate local florists.
In many instances small businesses are consumers too and like the rest of us they need larger businesses to be honest with them. In a recent Australian example, energy retailer Blue NRG drew the Australian Competition and Consumer Commission’s ire after it told around 500 business customers it had a legal right to increase electricity prices under fixed-rate contracts. In fact, it had no such legal right. The competition watchdog issued a warning about making misleading or deceptive statements about prices. This was especially problematic given the cost pressures facing many small businesses.
Small businesses often find themselves at a significant disadvantage when negotiating to supply goods and services to bigger businesses. Two years ago, the competition watchdog recognised this by providing an exemption from competition law that enables small businesses to collectively negotiate with their customers and suppliers. After notifying the commission, over seventy small business collectives have now taken advantage of this exemption, in a wide range of sectors across the economy.
To help consumers and boost productivity, the Australian government has been striving to improve competition settings for small businesses. We’ve increased the maximum penalties for breaches of competition and consumer law – bringing Australian penalties into line with other jurisdictions. We’ve banned unfair contract terms, protecting consumers and small businesses from clauses that allow the more powerful party to unfairly cancel a contract or arbitrarily change prices.
We’re establishing a designated complaint function which will commence next year. This will enable designated consumer and small business advocacy groups to bring systemic issues to the Australian Competition and Consumer Commission’s attention. And we’ve announced a review of the Franchising Code of Conduct to make sure it continues to work for both franchisors and franchisees.
We’re taking action in the face of a slowdown in productivity growth over the past decade. A lack of competition has contributed to this. There’s evidence that increased market concentration is linked to a rise in markups and a reduction in dynamism across many parts of the economy.
To make the most of big shifts in our economy while ensuring the most vulnerable are not left behind, we need to ensure our competition policy settings are fit for purpose. The trend towards digitalisation, the growth in services, and the net zero transformation present challenges and opportunities. Lots of potential for creativity. Some potential for destruction too.
Other countries are also considering their competition settings. The US Justice Department and the Federal Trade Commission recently released a draft update of their merger guidelines noting that ‘competition today looks different than it did 50 – or even 15 – years ago’.
Australian competition policy can’t be complacent. That’s why we have established a competition taskforce that will review competition reforms and provide practical advice for improvements. The review will take place over two years and provide ongoing advice rather than a single report.
The taskforce will look at a host of issues affecting small business. It will assess whether merger laws need updating. It will review the competition challenges of non-compete clauses that restrict workers from shifting to a better-paying job. It will consider the competition challenges of the net zero economy and digital services.
Startups aren’t just tech firms. Competition matters for local hardware stores, for local fashion designers and even for local florists. There’s plenty of thorny issues in competition, but when we get it right, the whole economy will be rosier.