28 November 2023

Address to the Australia Financial Review CFO Live Summit, Melbourne


Let's get together? Reforming merger laws to revitalise productivity


I would like to acknowledge the traditional custodians of the land on which we meet, the Wurundjeri Woi Wurrung people of the Kulin Nation.

I pay my respects to the Elders past and present, and acknowledge any First Nations Australians with us today.


Australia thrives on competition.

It is most obvious in our love of sports – even unexpected wins like the One Day Cricket World Cup – but it goes deeper than that.

You can’t have a fair go without competition.

Especially when we’re feeling the pinch of the cost‑of‑living pressures.

Competition is an important driver of dynamism.

It encourages productivity gains that can be passed to consumers through lower prices, more choice of higher quality products, and it helps workers gain higher wages.

But there are signs the intensity of competition has weakened across many parts of the economy.

This is likely to have contributed to Australia’s declining productivity performance in recent decades.

That’s why the Australian Government in August announced a wide‑ranging review of the nation’s competition policy settings.

We have established a Competition Taskforce in the Treasury to conduct that review over two years.

It will look at existing laws, policies and institutions to ensure they remain fit for purpose.

Last week (Monday, 20 November) the Taskforce released its first consultation paper seeking information and views about modernising Australia’s merger rules.

Consumers, businesses and industry are invited to raise any concerns about the existing approach and discuss the benefits and risks of proposed reforms.

We are asking for your feedback.

Are reforms to merger rules necessary to maintain a fair go for all?  

If so, what should they look like?

The consultation runs until 19 January 2024.

Trade practices

Until the introduction of the Trade Practices Act (TPA) in 1974, businesses were able to engage in all sorts of anti‑competitive behaviour to boost profits.

The structure of our supermarket sector is an example.

Case study (Merrett, 2013)

Our anti‑trust legislation did not restrict take‑overs that limited competition when Coles and Woolies moved into supermarkets.

Both were well‑established variety stores when they entered the grocery market in 1958.

At the time Australia had another 21 grocery buying groups.

As author David T. Merrett notes in The Making of Australia’s Supermarket Duopoly, Coles and Woolworths accounted for most of their competitors in the 1950s and 1960s.

Between 1956 and 1960 Coles acquired four competing food retailing firms – Penneys, S E Dickens, Wilkinson and Co (Beilby) and Matthews Thompson – totalling 366 shops.

By the late 1960s Woolworths had acquired Cash and Carry (BCC), John Wills Holdings P/l, Food Fair, Flemings, Centralian Traders, Nancarrows, and Crofts Stores – a total 279 stores.

Six years after Coles and Woolies entered the market, their share was approaching 20 per cent. By 1978, it was nearly 40 per cent share. Twenty years later and the two big supermarket operators had more than 60 per cent of the market.

Today we have a supermarket oligopoly dominated by Woolworths and Coles with some competition from international players Aldi and Costco.

The introduction of the Trade Practices Act, nearly 50 years ago, changed the game.

It shifted the rules from protecting entrenched profits to promoting competition.

The TPA enhanced consumer protections and outlawed price‑fixing, collusion and false advertising.

One of its biggest changes was a ban on anti‑competitive mergers.

The question we are asking now is whether our policy settings for mergers remain right for the times and right for the challenges in our economy.

Concerns have been raised that the anti‑competitive effects of some acquisitions are not adequately captured by current merger rules.

Concerns have also been raised around the effectiveness and efficiency of the current process.

Presently, merging businesses are not required to notify the ACCC and nor to wait for the ACCC’s view.

Transactions by large firms can also be a concern:

  • Creeping or serial acquisitions – that is, a series of small acquisitions including by large firms – which have been evident in retail sectors such as supermarkets, liquor and hardware
  • Acquisitions by large incumbents of nascent competitors. While nascent firms play a vital role in competitive markets as key sources of new ideas, products, and business models, it can be difficult to know whether they would have provided a meaningful competitive constraint in the future if not acquired, and
  • Expansions into related markets, including by digital platforms. For example, Google’s major acquisitions in recent years include YouTube, DoubleClick, Waze, and Fitbit. Meta’s major acquisitions include Instagram and WhatsApp.

Other countries are asking similar questions.

The United States, United Kingdom, Canada and the European Union have all reviewed or amended their merger rules in recent years.

This is partly due to growing concerns that industry structures and practices are impeding competition.

The International Monetary Fund has found that key indicators of market power have increased significantly across publicly listed firms in advanced economies since the 1980s.

The OECD has highlighted that several sectors in Australia are highly concentrated with limited entry of new firms and high prices.

But mergers are not necessarily a bad thing.

They can enhance productivity when efficiencies are passed onto consumers through lower prices, improved product quality, range, or service.

They can generate new capital, innovation, and techniques.

They can also help by replacing outdated technologies and encouraging entry into new markets.

And most do not raise competition concerns.

Ideally, merger control regimes would target those mergers that are anti‑competitive and allow mergers that are pro‑competitive or benign to proceed.

In practice, this is hard to achieve.

But getting it right is important because we also want merger settings that support increased certainty for business. 

Options for reform

Research suggests markups have risen, new entrant competition is down, and productivity – that underpins living standards – has fallen. 

In Australia, productivity growth has slowed over a long period, and most measures of dynamism have declined.

A range of competition indicators – including industry concentration, incumbency, and firm mark ups – suggest a deterioration in competition in Australia since the early 2000s (Competition Review, 2023).

The Competition Review’s consultation paper presents several reform options, including formalising the current voluntary system for notifying of mergers, through to reforms proposed by the Australian Competition and Consumer Commission.

The ACCC argues it should be notified of all mergers that potentially pose a risk to the community and that businesses need more incentives to provide information on the impact of a merger.

The mergers consultation will seek public input on a variety of these questions and potential changes to assess:

  • whether Australia’s current merger rules and processes are effective, enabling beneficial mergers while addressing those that could be anti‑competitive.
  • in what ways Australia’s merger rules and processes could be improved (Chalmers, 2023).

Different people will reasonably disagree on the right way forward.

Merger rules play an important role in shaping competitive forces across of the economy. 

For business, a less competitive market can increase the cost of doing business, and reduce the incentives and opportunities to invest, grow and innovate.

For consumers, a less competitive market leads to higher prices, less choice, and lower wage growth.

In the past disruptive firms have driven lower airfares, lower prices for mobile phone services and broadband, lower home loan interest rates and cheaper petrol prices.

A good example is the rise and fall and rise of low‑cost carriers (LCC) in the Australian domestic airline industry.

Case Study

In January 2023, the low‑cost carrier Bonza became the most recent independent entrant to the Australian domestic airline market.

The first phase of LCC entries came shortly after deregulation of the Australian airline industry. Compass Airlines began offering low‑cost services in 1990. At one point Compass had captured 10 per cent of the total domestic market, linking seven airports. However, Compass ran into problems getting access to airport slots and delays in aircraft delivery, while facing strong competition from Qantas and Ansett Australia. It ran out of funds and collapsed within a year. In 1992, there was a follow‑up Compass Mark II, but it operated for only about 6 months. No other airline entered the Australian domestic market for the rest of the decade.

Virgin Blue was established in 2000. While being part of the global Virgin brand no doubt helped, Virgin Blue was operating when Ansett Australia collapsed in September 2001. This caused a significant shortfall in seat capacity, enabling Virgin Blue to obtain valuable take‑off and landing slots at major airports and Ansett’s old terminal space.

In response to Virgin Blue, Qantas established its own LCC Jetstar in 2003 to compete more effectively for the growing leisure travel market (Whyte, 2015).

Over time, Virgin Blue moved away from a low‑cost business model by opening airport lounges (in 2003) and launching a frequent flyer program (in 2005). This gave it the opportunity to compete more directly with Qantas particularly for business travellers and appeal to a broader market. The transition was completed in 2011 when the airline was rebranded Virgin Australia.

Another LCC, Tiger Airways entered the Australian market and provided services until it was fully acquired by Virgin Australia in 2015. Competition from Tiger Airways led to Jetstar beginning to fly between major intercity routes as well as pricing promotions to better compete against the LCC (Murphy, 2007).

Virgin Australia went into voluntary administration in April 2020, and the renamed Tigerair, Virgin Australia’s LCC was formally discontinued in September 2020, leaving Qantas Group’s Jetstar as the country’s only budget airline at the time.

Bonza commenced operations on 31 January 2023, with a strategy to operate on unserved and underserved routes. This has provided additional connectivity and greater choice for travellers through new routes and by directly connecting regional centres to holiday destinations (ACCC, March 2023 and June 2023).

The competition landscape of the aviation industry has changed significantly since the pandemic. Airlines are no longer competing head‑to‑head but instead focusing on market niches (Dept Infrastructure, 2023).

While Virgin Australia has re‑emerged under private equity ownership in late 2020, its strategy now focuses on value conscious travellers (Virgin, 2020).

This now means that Qantas faces less direct competition in the premium corporate customer segment. 

For meaningful competition in the Australian aviation sector, the smaller airlines such as Rex and Bonza would need to grow significantly to become more meaningful competitors to the incumbents Qantas and Virgin Australia (ACCC, 2023).

Several key sectors now have fewer price disruptors and innovators than in the past.

In the last ten years many of the disruptive firms that drove lower prices and innovation have merged with large incumbents. 

We want to make sure Australia’s merger rules and competition policy are in the best interests of consumers.

That means enabling beneficial mergers while preventing or mitigating those that would substantially harm competition.

The future

We want to understand the extent to which Australia’s merger rules and processes could be improved.

We need innovative businesses more than ever to help drive the transition to net zero, to make the most of emerging data and digital innovations, and to seize the opportunities from the growth of the care economy.

A dynamic and competitive economy can help harness those opportunities.

It is important for existing industries too, so they can better manage change, build resilience and work more effectively.

Making our economy more competitive is critical for tackling cost‑of‑living pressures now and laying the foundations for future growth.

Thank you.


ACCC, ‘Airline Competition in Australia’, Report 11: March 2023, 4.3 History of LCCs in Australia, p24, Airline competition in Australia (accc.gov.au) [PDF 1.6MB].

Chalmers, The Hon. Dr Jim, MP, Treasurer; The Australian, 20 November 2023, Opinion piece: Nation's productivity demands fairness in merger process.

Competition Review, ‘Merger Reform Consultation Paper’, 2023, p4, Merger Reform – consultation paper (treasury.gov.au) [PDF 649KB]

Department of Infrastructure, Transport, Regional Development, Communications and the Arts, ‘Aviation Green Paper – Toward 2025’, 2023, p44, Aviation Green Paper – Towards 2050 (infrastructure.gov.au) [PDF 4.8MB].

Merrett, David T; ‘The Making of Australia’s Supermarket Duopoly, 1958–2000’, 11 March 2019, (dtm@unimelb.edu.au), The Making of Australia's Supermarket Duopoly, 1958–2000 (unimelb.edu.au) [PDF 400KB]

Murphy, Mathew; ‘Hold that Tiger: Jetstar set to pounce’, The Age, Melbourne, Australia, 29 May 2007 (archived), retrieved 29 September 2007, Hold that Tiger: Jetstar set to pounce.

Virgin Australia Airlines, ‘Ready for take‑off: Virgin Australia Group soars out of administration, unveils future direction’, 18 November 2020, Virgin Australia Newsroom, Ready for take-off: Virgin Australia Group soars out of administration, unveils future direction.

Whyte, R.; Lohmann, G.; ‘The carrier-within-a-carrier strategy: An analysis of Jetstar’, Journal of Air Transport Management, 2015, accessed 20 December 2022, DO-10.1016/j.jairtraman.2014.09.008, The carrier-within-a-carrier strategy: An analysis of Jetstar.