Beware government gimmicks in this election year
Sadly for consumers, Governments of all persuasions are often tempted to offer gimmicks rather than direct action in dealing with consumer issues.
Direct action, of course, is hard work for Governments. To begin with, there is the inevitable noisy attack by powerful vested interest groups on any proposal for direct action.
Have a look at any recent proposal for direct action on consumer issues and you will find a very loud, but well organised, chorus of big end of town interests opposing the proposal. Indeed, when such proposals are put forward, the lobbyists are immediately despatched to Parliament House to “educate” the Government on the “dangers” of direct action.
If this “education” process doesn’t work, then the big end of town is mobilised through industry associations such as the Business Council of Australia, Shopping Centre Council of Australia and the Australian National Retailers Association.
There will be more vigorous lobbying and by this stage the big end of town lawyers have joined in the noisy protest by their big clients. The big end of town lawyers will be relied upon to provide an opinion regarding, you guessed it, the “legal dangers” of the proposals.
With such shrill big end of town attacks it’s perhaps not surprising that Governments typically lack the backbone for direct action. That is, until the self interested big end of town voices are drowned out by consumer (ie voter) protests that they are being ripped off by large and powerful companies.
Two examples conveniently demonstrate how Governments can be seduced into offering gimmicks instead of implementing direct initiatives.
Take the WA Fuelwatch scheme for example. Yes, this provides transparency to motorists on petrol prices, but it’s a gimmick, and an expensive one at that. Fuelwatch has many problems. Two problems will suffice to illustrate the point.
Firstly, Fuelwatch prevents Perth petrol prices from coming down during the day. Fuelwatch locks up prices for 24 hours. This means that prices are very quick to rise, but very slow to come down. It also means that Perth motorists also face a price cycle in the same way that motorists do in the Eastern States where there is no Fuelwatch.
Secondly, the transparency under the WA Fuelwatch scheme comes at a cost to WA taxpayers. Motorists in the Eastern States also get transparency, but in their case they get it through the privately run Motormouth website at no cost to taxpayers.
Despite these problems, successive WA Governments have persisted with Fuelwatch because they can point to “doing something” about petrol prices. Direct action involving the introduction of new competition to the cosy oil industry club comprising the oil majors and Coles and Woolworths is possible, but leads to frontal attacks on the Government by the cosy club.
What could direct action involve? ACCC enforcement of the Birdsville Amendment to our competition laws against predatory pricing would be a start.
Predatory pricing involves a large and powerful company selling a product below its cost for a sustained period of time with the purpose of driving out independent competitors. Once those independent competitors are driven from the market the predator raises its prices to consumers.
Outlawing geographic price discrimination would be another way to ensure that a large and powerful company charges the same low price for the same petrol at all its service stations in the same geographic area. That was the purpose of the proposed Blacktown Amendment to our competition laws.
You guessed it, the Blacktown Amendment was opposed by the same companies that rip off motorists by charging a different price for the same petrol at service stations owned by the same company even across the same road.
Surprise, surprise, the Federal Government “understands” the “concerns” expressed by the oil companies and Coles and Woolworths and also opposes direct action involving the Blacktown Amendment.
What alternatives does the Federal Government offer to deal with the cosy oil industry club? Well, apart from endless inquiries by the ACCC, we have been given “advice” by the Federal Petrol Commissioner that since world oil prices have gone up recently motorists should fill up because retail prices will go up.
There you have it! The tough petrol cop on the beat we were promised by the Rudd Government is suggesting we fill up before prices go up!
No sign of any direct action from the ACCC or the Federal Government, just “advice.” No doubt, good and obvious advice, but with private industry commentators also telling us to fill up before the price rises, why don’t we just do away with the petrol commissioner and save taxpayers his salary and associated costs?
Next, we have the banks. Here the Federal Government offered us another gimmick. This time it was the “bank switching” package. With 4 major banks dominating the banking sector so comprehensively and with the pain and suffering associated with trying to switch banks, it’s hardly surprising that the 4 major banks act as a law unto themselves.
The problem here is that the 4 major banks have been allowed to buy out their competitors by the ACCC and by our weak anti-merger laws. Direct action in this case is simple. Just strengthen our anti-merger laws.
Our current weak ant-merger laws allow the ACCC to let through 97% of all mergers and acquisitions that it considers. This percentage is just too high and means that Australia has some of the most highly concentrated markets in the world.
That means that in Australia as few as 1, 2, 3, or 4 major companies dominate key sectors of the economy, while in other developed countries many more companies operate in the marketplace and compete in a cut throat way to deliver lower prices to consumers.
Few players in a market are a recipe for either collusion or “price coordination” behaviour. Either companies collude to set prices or they just act as a cosy club and shadow one another on prices and terms and conditions.
Recently, Senator Nick Xenophon introduced a proposal into Federal Parliament that would strengthen our anti-merger laws. The proposal is called the Richmond Amendment to our competition laws and surprise, surprise that proposal is being opposed by the big end of town and their lawyers.
Why would the vested interests oppose the Richmond Amendment? Simply because the big end of town and their lawyers are hooked on mergers and acquisitions! Mergers and acquisitions are an easy way to show “growth” and to knock out the competition.
Less competition means higher prices for consumers. Fewer competitors following mergers and acquisitions mean fewer competitors to keep prices down for consumers.
For the lawyers, mergers and acquisitions generate lots of revenue for the law firm. Nothing wrong with anyone making lots of money on mergers and acquisitions, provided, of course, that’s not at the expense of consumers and provided that doesn’t influence any opinions they may offer on reform proposals designed to stop the destruction of competition through mergers and acquisitions.
So, in the lead up to the next Federal Election it will be interesting to see if we get more gimmicks from the Federal Government or whether growing voter interest in direct action will spark the Government’s imagination.
While the Federal Government may not appreciate this author’s drafting of the Birdsville, Blacktown and Richmond Amendments, the Government can certainly come up with their own effective direct action competition law reforms. Nothing like an election to focus the mind!
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