Next year marks the 50th anniversary of a ground-breaking piece of legislation that shaped the modern Australian economy.
The Trade Practices Act, introduced by Labor in 1974, transformed the way companies operated and set the standard for what consumers should expect from business.
Previously firms could engage in all sorts of anti-competitive practices to inflate their profits without the risk of consequence or sanction.
The new legislation changed all this, laying the foundations for a more productive and competitive economy in the decades that followed.
The reforms enhanced consumer protections and outlawed behaviours such as price-fixing, collusion and false advertising. One of biggest changes was a ban on anti-competitive mergers.
Today, as part of the Government’s wider review of the nation’s competition policy settings, we are releasing a consultation paper on Australia’s merger settings.
One of the big questions asked in the paper prepared by Treasury’s newly established Competition Taskforce is whether our current mergers regime remains fit for purpose.
The United States, the United Kingdom, Canada and the European Union have all reviewed or amended their merger rules in recent years.
This partly reflects increasing concerns around the impact of highly concentrated industries on the broader economy, particularly with the rise of digital businesses.
International evidence suggests current merger rules may be too permissive, allowing some mergers that don’t deliver benefits to consumers, workers and the wider economy.
The International Monetary Fund has found that key indicators of market power in advanced economies have increased significantly across publicly listed firms since the 1980s.
Academic research has found many top firms are growing their market share, and businesses at the top of their industries are often remaining there for longer. Other research suggests markups have risen in some sectors while new entrant competition has fallen.
These factors may have contributed to Australia’s weaker productivity performance in recent decades.
For consumers and workers, the implications are simple: a less competitive market means higher prices, less choice, worse products and services, and lower wages growth.
Other businesses also suffer from unfair practices and higher business costs. And less competitive markets reduce the incentives and opportunities for businesses to invest, grow and innovate.
Right now, Australia needs 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.
In the past, the arrival of new businesses has led to lower prices for mobile phone services and broadband, lower home loan interest rates and cheaper petrol prices. There are concerns that increasingly these kinds of disruptive firms are being acquired by larger incumbent businesses in a way that harms competition.
Of course, beneficial mergers can drive economic growth by re-tooling businesses, bringing in new technologies and achieving economies of scale. Mergers can support competition including by making businesses more sustainable and giving them the scale to enter new markets.
The fact is that most mergers do not raise competition concerns.
That’s why we need to ensure our regulatory arrangements operate efficiently, focus on the small number of mergers likely to harm competition and harm the community, and provide certainty for businesses and investors as well as protection for consumers.
The consultation paper released today seeks to determine whether our policy settings for mergers remain right for the times and right for the challenges in our economy.
It highlights a variety of potential changes around the notification process for mergers, the test for whether a merger is likely to substantially lessen competition, and who should be the ultimate arbiter about whether a merger should proceed.
The paper includes reforms proposed by the Australian Competition and Consumer Commission as well as looking at examples from other jurisdictions around the world.
The intention is to better understand the extent to which Australia’s merger rules and processes could be improved.
We want to enable beneficial mergers while preventing or mitigating those that would substantially harm competition.
Ultimately, mergers should drive improvements in productivity, put downward pressure on prices and deliver more choice for Australians dealing with cost-of-living pressures.
This means any changes to merger settings should deliver benefits to the economy and to consumers while providing certainty to business.
Over coming months, the Government will be seeking community views on merger reform. We want to hear from big and small businesses, consumers and experts.
After all, we all stand to benefit by making sure mergers work for the Australian economy and work for the Australian people.