GLEN BARTHOLOMEW:
Australia has one of the most concentrated economies in the world and a lack of competition is seeing many of us pay more for goods and services.
As the cost of living continues to rise the Federal government today moved to explore tougher laws to stop monopolies and protect consumers from big companies with too much market power.
The Assistant Minister for Competition and Treasury Andrew Leigh announced the review today, alongside Treasurer Jim Chalmers, and he joins us now.
Andrew Leigh, good afternoon.
ANDREW LEIGH:
Good afternoon, Glen, great to be with you.
BARTHOLOMEW:
You've told this program in the past that you think there's just not enough competition in our economy. Is it failing consumers? Are we losing out as a result?
LEIGH:
It's not just hurting consumers; it's also hurting suppliers. So you think about our farmers who are squeezed between concentrated suppliers of their fertiliser, and concentrated producers who are buying their products.
You think about workers who have too few choices about where to work, particularly in regional markets, which can often mean they don't earn a fair wage.
And of course to think about consumers who are hurt in areas from banking to baby food to beer, where there's often just a couple of big players.
Market concentration has gotten worse over the last couple of decades. We've seen a rise in mark‑ups, we've seen a fall in the new business formation rate and in the rate of workers shifting to a better job.
So all of that's the context in which we've set up this competition review aimed to take a broad approach to find practical reforms across the economy that will boost competition.
BARTHOLOMEW:
All right. So where are the areas of obvious concern or market failure? It's a pretty long list.
LEIGH:
It certainly is, Glen. One area just to highlight to your listeners is the area of noncompete clauses. So a recent survey found that one in five workers had a clause in their employment contract that impeded them from shifting to a better job.
These aren't just tech executives; these are hairdressers and early childhood workers whose employment agreements contain a clause which impedes their ability to go down the road and get a pay rise and impedes the ability of a new business to employ them in its start up phase.
But that's one of the things that the competition review will be looking at. Another ‑
BARTHOLOMEW:
What about the concentration in some of these industries though, we're looking at what, supermarkets, airlines, banks, gas, insurance, the list goes on, yeah?
LEIGH:
It certainly does, and the Australian Competition and Consumer Commission, first under Rod Sims and then more recently under Gina Cass‑Gottlieb, has made specific proposals for reforming our merger laws. And to make sure those merger laws are fit for purpose, that they're updated for a digital age, and so analysing those merger reform proposals that the competition watchdog has put forward is going to be a priority for the competition task force.
BARTHOLOMEW:
Let's look at that specific area. We heard a little from Woolworths earlier. The National Farmers' Federation says Australians pay some of the highest prices in the world for groceries. Staggering for a country that's a world leader in the production of cost‑effective food. It says our food supply chains are controlled by just a handful of organisations with significant market power, putting farmers and consumers at a disadvantage. Coles and Woolworths' profit results are out this week. Are supermarkets, for example, profiting too much in this inflation crisis?
LEIGH:
Well it's certainly true that if you compare us with other countries our grocery sector is pretty concentrated. We need to make sure, for example, that when States and Territories are making planning decisions that they've got competition in the back of their minds, that they're ensuring that there are a range of different outlets where people can shop in order to get a fair deal.
BARTHOLOMEW:
We obviously don't want it to get any worse, the consumer watch dog recently moved to block ANZ Bank from buying Suncorp's banking division. Was that the right move given the state of that sector right now? Do the big four already have too much power?
LEIGH:
That's a decision before the courts at the moment so it certainly wouldn't be responsible for me to comment on the specifics of that. We're focused on the broad competition settings, making sure that they're fit for purpose in a digital age.
BARTHOLOMEW:
Do you think there needs to be more competition in our banking sector?
LEIGH:
I'd certainly welcome competition wherever we see it. Indeed, for people who are looking for more competition you can often get a better deal just by calling up your mortgage provider. Often they'll be able to find you a better deal straight away.
BARTHOLOMEW:
Is part of the problem that the law firms defending the big companies have increased their resources far more than the regulators? Do we need to boost the resources and the capability of the ACCC to deal with some of these merger proposals?
LEIGH:
Yeah, we're building back the capacity of the public sector after a decade of being hollowed out under the former government. You're right, that a lot of the capacity of the public sector has been lost not just in competition but in other areas. So that's a priority for the Government. It won't be turned around in a single year but it's something we're looking to do. But right across the board we need to make sure that the competition laws are fit for purpose. Digital platforms are increasingly playing a gatekeeper role.
BARTHOLOMEW:
I wanted to ask about that. There's just what, a few big companies dominating that space obviously. They're playing a bigger role than ever now and obviously in the future. What realistically could be done there? Will you look to what's happening overseas?
LEIGH:
Well the ACCC's proposal has been platform specific regulation, drawing a leaf from what we do in the national security space where we say to certain companies once they hit a certain size that they will be subject to additional regulations In the national interest.
We're looking at those proposals. And if you look at areas like search or social media or online sales, you do see significant players playing a gatekeeper role, which is important for the rest of the economy.
So if you want to sell small goods online there's only a couple of platforms you can do that through, so making sure those platforms aren't gouging their customers really matters.
If you're a hotel and you're looking to have your hotel listed, then there's really only two big platforms and they're charging double digit fees for lifting your hotel on their platforms. And then sometimes treating customers in a way that they can't always see what is the best deal, and sometimes what is being listed on these online travel agencies, other hotels which are finding the biggest commission rather than the best deal for the consumer.
BARTHOLOMEW:
The Farmers' Federation says it's long called for action on the increasing rate of market concentration and a lack of competition but says things have just been getting worse. A point you concede. It says this review may be a step in the right direction, but it needs to deliver more than hot air. Are you confident it will make a difference given the past experience in the 1990s?
LEIGH:
Yeah, I mean the experience of the 1990s really is what gives you most hope here. Paul Keating tasks Fred Hilmer with putting in place a practical, evidence‑based review. The results of those competition reforms see a huge productivity growth over the 1990s, and one estimate is that the dividend to Australian households was in the order of $5,000 a household.
So that's exactly the sort of example that we're looking to and the ability to go right across the political spectrum with this. We don't believe we've got a monopoly over good ideas. We're open to the competition of ideas, just as we want to see more competition in the real economy.
BARTHOLOMEW:
Nice. ACCC former chief Allan Fels says there are signs the economy is stagnating due to the lack of competition. The problem's getting more serious every day that passes and says you need to deliver on improved competition by the end of this year. You say you won't wait to implement ideas. When might we expect some action?
LEIGH:
Well we'll be rolling them out as soon as they come forward. And, you know, what I really welcome in this space is that you have thoughtful people who have headed the ACCC, like Allan Fels, like Rod Sims, who'll be advising our competition task force, who continue to be active in the public debate.
We've got a thriving conversation around productivity. We've got much better data than ever before which allows us to look at these problems like market concentration and mark ups that I mentioned at the outset, and so bringing that data to bear and making sure we're modernising the laws in a digital age, that we're getting the most out of the renewables transition.
All of this really is part of the Government's ambition to set Australia up to be as productive as possible and to have higher living standards, as the Treasurer will announce when he brings down the Intergenerational Report tomorrow. We have real opportunities to seize the coming decades.
BARTHOLOMEW:
Andrew Leigh, thanks very much.
LEIGH:
Thanks so much, Glen.
BARTHOLOMEW:
The Assistant Minister for Competition and Treasury talking competition.