A lazy government body that needs to get moving
Have you ever dealt with the ACCC? Have you ever had an issue that you thought the ACCC should be looking at only to find that the ACCC declined to look at it or seemed to take forever to investigate?
Just ask any supplier or farmer who has had an issue or concern with the major supermarket chains. For well over a year the ACCC has been taking the public position that there’s no evidence to justify an investigation into the alleged practices of the major supermarket chains. Then just recently the ACCC starts actively asking suppliers to come forward with their concerns.
Now there are a few issues that need to be immediately clarified. First and most importantly the ACCC doesn’t need to wait for suppliers, consumers or anyone else to come forward with a complaint in order for the ACCC to investigate. Where the ACCC suspects a possible breach of our competition and consumer laws it can investigate any matter within its jurisdiction and has the power to collect information as part of any investigation.
The ACCC can and should collect its own evidence. And there’s no doubt it has ample power to do so. The ACCC can require people to answer questions. It can require a supplier, a CEO or any other employee of a major supermarket to give evidence under oath where the ACCC has reason to believe that there could be a breach of our competition and consumer laws.
That’s a serious power allowing the ACCC to get to the bottom of any concerns relating to the major supermarket chains in a timely manner.
Does the ACCC always move to investigate and collect its own evidence in a timely manner? The most recent debate surrounding the major supermarket chains was sparked on Australia Day 2011 and has now been raging for over a year. Back in late January or early February 2011 the ACCC could have immediately announced that it was investigating whether there was any predatory pricing or misleading conduct in the supermarket sector.
Both major supermarket chains had announced that they were cutting prices on some products and the real question was whether those announcements were giving consumers the incorrect impression of price cuts across the full supermarket range when in fact only a fraction of shelf prices were being cut.
With up to 20,000 products or more in a major supermarket the key issue for the ACCC was to determine what was really happening to the price of all products across the supermarket range. More specifically, were a few well publicised price cuts drawing attention away from price hikes elsewhere or from less frequent discounting by the major supermarket chains on other products across the supermarket range. Since either scenario would obviously mean that consumers were really worse off the onus was clearly on the ACCC to ask all the right questions on behalf of consumers.
Did the ACCC ask all the right questions of the major supermarket chains? Well, we don’t know and that’s why we need an independent review of the ACCC. The ACCC moving quickly to investigate potentially anti-competitive, unconscionable or misleading conduct is absolutely essential to effectively protect competition and consumers.
We need a full scale independent review of the ACCC for the simple reason that we need to be confident that the ACCC is getting it right when it comes to competition and consumer matters. An ACCC failure or mistake can have significant negative consequences.
Take for example the issue of mergers and acquisitions. The ACCC has the ability to stop mergers and acquisitions that may substantially lessen competition. Now the substantial lessening of competition test is very difficult to prove, but it’s critical that the ACCC moves quickly to stop anti-competitive mergers and acquisitions.
The problem has been that the ACCC has generally only stopped a small percentage of mergers and acquisitions. Remember the ACCC allowed the big banks to take over or neutralise its smaller, but vigorous, competitors. And it has been the ACCC that has allowed the major supermarket chains to increase their dominance in the grocery, petrol and liquor markets.
The ACCC has essentially stood by and allowed creeping acquisitions where the major supermarket chains have acquired independents in a piecemeal fashion over a period of time. While individually these small scale acquisitions don’t generally substantially lessen competition, they can have the effect of dramatically reducing competition over time.
Can the ACCC have done more to stop creeping acquisitions? Well, we don’t know as we generally get very little feedback from the ACCC on those occasions it has considered creeping acquisitions.
Again, an independent review of the ACCC would look closely at the ACCC’s approach to mergers and acquisitions. An independent review of the ACCC would also get to the bottom of the ACCC’s defeat in the Metcash/Franklins case. Here the ACCC was trying to stop Metcash, the independent grocery wholesaler, from acquiring Franklins stores.
While of course we should expect the ACCC to do all it can to stop anti-competitive mergers and acquisitions, the Metcash/Franklins fiasco, where the ACCC lost so comprehensively in the Federal Court, simply confirms that the ACCC had made a mistake in trying to stop the wrong merger or acquisition.
Franklins was coming under increasing financial pressure and its commercial failure would have simply meant that Coles and Woolworths would have most likely ended up getting all the best Franklins sites. A sale to Metcash would have maximised the chances of the Franklins sites remaining in independent hands.
Surely, having additional, efficient independents to take on the major supermarket chains would be good for competition and consumers. If the ACCC had been concerned with the power of Metcash it should not have allowed Metcash to have previously acquired the only other remaining major wholesaler to independents.
It was that previous acquisition by Metcash that had allowed it to effectively become a monopoly wholesaler to independents. If the ACCC was now worried about the power of Metcash, the ACCC only had itself to blame as it had allowed Metcash to get to that position.
So obviously the ACCC’s comprehensive failure in trying to stop Metcash from acquiring Franklins only serves to highlight the ACCC’s previous failure to stop Metcash effectively becoming a monopoly wholesaler to independents. We certainly need an independent review to see if there have been any other mistakes by the ACCC when dealing with other potentially anti-competitive mergers and acquisitions.
It’s time we give the ACCC a thorough check up to ensure that it learns from any previous mistakes and to make sure that we can have the strongest level of confidence in the ACCC. No doubt the ACCC believes that it’s a highly professional and efficient body and in those circumstances it would surely welcome a full scale independent review.
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