Phone tapping powers ring changes on petrol prices
With growing evidence that cosy clubs between large and powerful companies are bad for competition and consumers, the Federal Government needs to act quickly to deal with the ACCC’s concerns on the issue.
The latest push from the ACCC came last week when it decided to oppose the proposed Caltex acquisition of 302 Mobil service stations. As part of that decision the ACCC expressed grave concerns that the oil majors appeared to be engaging in “price coordination” activities.
In plain English that means that the ACCC is alleging that the oil majors are acting as a cosy club when it comes to petrol prices. In particular, the ACCC is pointing to the oil majors conveniently following each other on prices. According to the ACCC this is leading to sharp rises in prices at the beginning of the weekly price cycle and slow falls during the cycle.
Now the average motorist might say that sounds like collusion, but the competition lawyers would say that “collusion” has a technical legal meaning that requires that the oil majors actually come to some sort of agreement between themselves to act in unison on petrol prices.
Proving collusion is notoriously difficult as getting the proof of any agreement on prices has been next to impossible. That is, until recently, when the ACCC and the Australian Federal Police were given the ability to secretly tap phones and record meetings. The FBI has had those powers for years in the United States and has used them with considerable success, but our Federal Government has only recently given our enforcement agencies those powers.
Sadly, delay has been the hallmark of this Federal Government. We have seen a preference for endless Government Inquiries and “watching” exercises. The Federal Government and, Competition Minister Emerson in particular, like to watch.
We had the Fuelwatch farce which was about watching petrol prices. Thankfully, Fuelwatch was rightly killed off by Federal Parliament. In the meantime, Western Australia has continued with its state-based version of Fuelwatch with the inevitable result that motorists there are still getting ripped off in the same way as their Eastern cousins.
Fuelwatch remains just a gimmick and the fact that the oil majors have also been able to impose a weekly price cycle in Perth demonstrates that Fuelwatch is neither the answer to cosy clubs nor to the underlying competition concerns in the petrol industry.
Then came the GROCERYchoice debacle. Another gimmick, but this time it was much worse as millions of taxpayers’ dollars were wasted by the ACCC and the Federal Government. The Federal Government flicked it off to the Consumer group Choice only to have Minister Emerson kill it off before Choice could relaunch the new website. Woolworth and Coles didn’t want to provide the necessary information to Choice and the Federal Government took the duopolists’ side.
Clearly, watching prices is not the answer to breaking the stranglehold that large and powerful companies have over petrol, groceries and banking services.
What is needed is a multi-pronged approach.
First, we need to the ACCC and the Australian Federal Police to use their new powers to tap phones and record meetings between employees of rival companies. Let’s find out once and for all if competitors are agreeing on prices behind the scenes. Collusion is like theft and the corporate crooks need to be brought to account.
The ACCC is constantly hearing of allegations of cartel behaviour and now it has the additional powers and the back up of the Australian Federal Police to get the much needed evidence.
With serious jail terms of up to 10 years for cartel behaviour, the ACCC needs to send a strong signal and get some of crooks before the Courts as quickly as possible.
Enough of watching, let’s have some action from the ACCC. The ACCC made a great start in opposing the proposed Caltex acquisition of the Mobil service stations. However, it needs to do much more.
We need to protect competition and consumers from the various anti-competitive practices of large and powerful companies. The ACCC can actively enforce the Birdsville Amendment against predatory pricing. The Birdsville Amendment prevents a company with substantial market share from selling below its costs for a sustained period with the purpose of destroying competition.
Predatory pricing is bad for consumers because once the competition is destroyed prices go up and consumers get ripped off by the cosy club of large and powerful companies that remains.
Next, we need Minister Emerson to strengthen our competition laws. We don’t need the Minister to set up more Inquiries. We simply need the Minister to quickly deliver on the Federal Government’s promised strengthening of our anti-merger laws.
In June this year the Federal Government released a “discussion paper” with proposals to deal with creeping acquisitions. Creeping acquisitions are small scale acquisitions by large and powerful corporations that collectively destroy competition. Sadly, not only are the Federal Government’s proposals weak and ineffective, but Minister Emerson has been very slow to move on the issue.
Another issue on which the Federal Government continues to procrastinate relates to the “price coordination” activity that the ACCC is so concerned about. In January this year, the Federal Government issued another “discussion paper” with proposals to deal specifically with price coordination activities.
Again, while these proposals came a year after the ACCC first raised the issue with the Federal Government, a further year has gone by and the Federal Government and Minister Emerson have still not implemented the necessary changes.
So after two years, the best Minister Emerson can do is to have another Inquiry on “price coordination” behaviour.
Consumers urgently need world’s best competition laws to be implemented. They don’t need more inquiries, endless “discussion papers” and procrastination.
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