This town ain’t big enough for two petrol sheriffs

First, a little bit of background. The ACCC Petrol Commissioner was another one of those promises made by the Labor opposition before the last election. In fact, lots of promises were made on petrol and grocery prices. On petrol Wayne Swan boldly proclaimed that under Labor motorists would get a tough “new” petrol cop on the beat. We were reassured that the petrol cop would watch petrol prices “very closely.”

Now there were a number of possible problems with the Swan’s attempted “hairy chested” approach to having a new petrol cop. For starters, the ACCC had long been watching petrol prices. In fact, the ACCC has always been an avid “watcher” of petrol prices.  Indeed, that’s been the problem with the ACCC in recent years - a preference for watching rather than tough and proactive action. So, what would be different about a “Petrol Commissioner”?

Well, as far as this author can see, not much. The Petrol Commissioner would simply be doing what the ACCC had long done and, that is, “monitor” petrol prices. There were no new powers to be given to the petrol cop and after the first petrol cop resigned suddenly, the replacement was a longstanding senior ACCC employee who was given a new title of “petrol commissioner.” Sadly, for motorists a new title for an existing ACCC staff member doesn’t make up for a lack of new powers .

Let’s be clear about one thing. The current Petrol Commissioner - a guy called Joe Dimasi - is a longstanding economist at the ACCC with longstanding experience in regulatory matters. This is not about the individual holding the title of Petrol Commissioner, it’s about the “office” of petrol commissioner and what that really means in practice for motorists. Has the “office” of petrol commissioner led to lower petrol prices? Of course not.

Why won’t giving a person the title of petrol commissioner lead to lower prices? Quite simply because the petrol commissioner needs to be given a well stocked arsenal of regulatory “weapons” and needs to use those and existing powers appropriately, but firmly. That doesn’t mean Soviet or communist Albanian style “methods” of central planning but rather a measured and well targeted set of competition laws.

What is really needed is a Federal Competition Minister to have a close look at the United States antitrust laws and the English competition laws to see what’s missing in Australia. It’s those missing elements such as a general divestiture power to break up large and powerful companies acting anti-competitively that is giving Australia the same concentrated markets they had in communist Albania and the Soviet Union.

The simple message is that having just one, two, three or four large companies dominating a sector of the economy is bad news for consumers. We all know how the old communist countries were dominated by a very small number of large and powerful state owned enterprises. We should certainly not aspire or condone having key sectors of the economy dominated by just a few large and powerful private companies.

The problem with having less than a handful of dominant large and powerful companies is simply that they have both the power to gouge consumers and the resources to insulate themselves from competition and external scrutiny. Dominant large and powerful companies tend to act as a cosy club. They may be slow to innovate, but quick to raise prices. They may be slow to pass onto consumers any efficiency gains from their size and scale, but quick to attack governments and those seeking to make them accountable.

That’s why strong anti-merger laws are critical. On that score, the ACCC got it right when it stopped Caltex from buying the 300 Mobil service stations up for grabs. With Mobil seeking to exit the retail petrol market it was essential that those sites didn’t end up in the hands of the oil companies, Coles and Woolworths. Now it should be noted that the ACCC stopped Caltex under the existing anti-merger law and that had nothing to do with whether or not we had a petrol commissioner. The ACCC would have been capable of making the same decision in the absence of a so-called Petrol Commissioner. Of course, the petrol commissioner as just another commissioner of the ACCC would have been part of the decision to stop Caltex, but ultimately the buck stops with the ACCC Chairman and Commissioners acting as a whole.

Stopping the proposed Caltex acquisitions was only a small step in restoring meaningful competition in the petrol market. The ACCC and Federal Competition Minister Craig Emerson need to deal effectively with creeping acquisitions and the lack of real competition in wholesale petrol market. Creeping acquisitions are used by large and powerful companies to strategically buy out individual competitors one by one until independent competition has been destroyed. Once independent competition is destroyed you are left with communist style heavily concentrated markets where consumers are ripped off by a small number of very large and powerful companies.

So do we need a petrol commissioner? No we don’t. The so-called Office of the Petrol Commissioner is just another wasteful drain on taxpayers’ money and the abolition of the Office would save taxpayers a lot of money. Now, we also don’t need two ACCC deputy Chairpersons as is currently the case. One deputy is more than enough and a second one was just another promise by this Labor Federal Government that taxpayers have had to fund.

One is reminded of a painting hanging in the reserved area of our Federal Parliament with just two words painted on the canvas - “promises, promises.” This author has always wondered if there is another painting around Parliament House with the words “excuses, excuses.” That wouldn’t surprise this author, but a painting with the words - “action, action” - probably would. The moral of the story - we need Governments of all persuasions and the ACCC to “speak softly and carry a big stick” on competition law and policy issues.