Watching the government watching prices

With intensive lobbying and relentless scaremongering by big business against any strengthening of competition laws designed to promote the consumer interest, lesser Governments and Ministers just go weak at the knees and look for ways to be seen to be “doing” something without doing anything to upset the big end of town.

That is where a policy of “watching” becomes so appealing to Governments and Ministers lacking the backbone to stand up to big corporate interests intent on gouging consumers.

How does a policy of watching work?

Well first, the Minister announces an “official Inquiry”. This is how the watching begins. It’s very simple for a Minister to make a big statement that is he or she is “determined” to get to the bottom of any wrongdoing against consumers by establishing an inquiry.

On the PR front an inquiry is marketed as real “action” by the Minister’s media people.

A good thing you might say. But before we get too excited and think that inquiries will blow the whistle on the growing threat to competition in the Australian economy there a few things that we need to remember about inquiries.

To begin with, an inquiry can’t obviously find any major problems. Finding major problems would reflect badly on the relevant corporate regulator, typically the Australian Competition and Consumer Commission.

Put bluntly, finding a major problem would reveal that the regulator has previously failed to do its job, something that the Minister and the regulator would clearly not want.

So interestingly, the interests of the Minister and the regulator in not finding any major problems align nicely, too nicely one might say.

But, of course, the inquiry can’t find that everything is working perfectly well on behalf of consumers as that would be too cynical and would risk calls for further inquiries. An in-house manageable inquiry carried out by the ACCC is infinitely preferable to a Parliamentary inquiry that may politically embarrass the Government.

Not surprisingly, an inquiry commissioned by the Minister will find that there while competition is working “tolerably” well, there are some very minor issues that need a little bit of work.

One area commonly rolled out as needing a little bit of work is the need to give consumers more information.

Cleverly designed to be a self evident truth – yes, consumers always need more information if they are to avoid being ripped off, but scratch deeper and you find that more information does not equate to more real competition.

In fact, there is a considerable difference between giving consumers more information that merely shows by how much they are being ripped off and taking action to strengthen our competition laws to stop the consumer rip off in the first place.

So instead of stronger competition laws to introduce real competition into the petrol industry we were to get Fuelwatch.

Fuelwatch was Federal Government’s grand plan to do “something” about petrol prices. That plan was nothing but a mirage.

To understand how much of a mirage Fuelwatch was going to be it’s important to appreciate the trickery involved in Fuelwatch.

For starters, while Fuelwatch was promoted as giving motorists information about petrol prices, that information had long been available though a privately operated website.

The difference was that Fuelwatch would cost taxpayers millions of dollars but the privately operated website was freely available at no cost to the taxpayer.

The other, more dangerous, difference was that Fuelwatch would stop petrol retailers from discounting during the day. This would mean that petrol prices would be slow in falling, but quick in rising as retailers merely shadowed one another after checking the Fuelwatch website every day.

So dangerously for motorists a Fuelwatch scheme that was to be rolled out so the Federal Government could say that they were doing “something,” would have become part of the problem.

Just look at the experience in Western Australia where a Fuelwatch scheme has operated to set prices at the bottom of the Perth pricing cycle that have been consistently higher than those in Sydney where there is no discredited Fuelwatch scheme.

So without Fuelwatch Sydney motorists can get cheaper petrol than motorists do in Perth.

Could Sydney petrol prices be even lower? Certainly, if there was real competition at the wholesale and retail level. But that requires the Federal Government to take real action against the cosy club made up by the big oil companies and the major supermarket chains.

What’s needed is less “watching” and a determination to implement strong and effective competition laws for the benefit of consumers.