Big guns out to tame Allan Fels

by Anna Pha

The Australian Competition and Consumer Commission (ACCC) is under attack 
and the big guns are being fired by big business. The Chairman of the 
Commission, Allan Fels, is attempting to do what in the eyes of the 
corporations cannot be forgiven. He is calling for greater powers for the 
ACCC and the imposition of criminal sanctions for offences under the Trades 
Practices Act by those in big business boardrooms. The Business Council of 
Australia is strongly opposed to the ACCC's position and insists that the 
powers of the ACCC be weakened, not strengthened.

The Federal Government is set to make significant "reforms" to competition 
law and, for this purpose, has initiated what is referred to as the Dawson 
Review. Such "reviews" are a much favoured method by which governments 
produce a supposedly "independent" report to back up and justify what they 
have already decided to do.

The ACCC was formed in 1995 by the merger of the Trades Practices 
Commission and the Price Surveillance Authority. Its formation was linked 
to the adoption of national competition policy by State and Federal 
Governments. It is responsible for the administration of both the Trades 
Practices Act and the Price Surveillance Act.

There are five Commissioners who have responsibility for different areas of 
the Act.

The ACCC has played an important role in the implementation of competition 
policy allowing private companies to compete with Telstra, Australia Post, 
on electricity markets and in other public utilities.

Companies planning significant mergers or takeovers must first seek the 
approval of the ACCC.

The ACCC also deals with unfair market practices, price collusion, tender-
rigging, market sharing, and other practices which can result in monopoly 
pricing or disadvantage or restrict the ability of other companies to carry 
out business.

The Consumer section of the Act covers such things as misleading and 
deceptive conduct of business — e.g. in the advertising or labelling of 
products.

The ACCC exercises considerable powers and often deals with some of the 
biggest players in industry.

In recent times it has trodden on the toes of big players when it 
investigated what were seen to be collusive relations between the banks in 
relation to credit card fees and interest rates. It went into the question 
of petrol prices during which officers of the ACCC raided the offices of 
several of the oil companies, including Caltex.

These actions set alarm bells ringing in the boardrooms.

One of the main aims of the Act is to guard against or curb the most 
rampant abuses of monopoly power by corporations where these can hurt other 
corporations and interfere with market mechanisms.

In theory competition between a number of private companies is supposed to 
lead to lower prices and better quality products and services.

Lower prices for communications, transport, electricity, etc, would mean 
lower costs for companies in other industries. This in turn makes them more 
competitive, especially on international markets.

But the drive for monopolisation is much stronger than the support for 
competition. In practice, competition leads to the monopolisation by a 
small handful of corporations in any case.

It is inevitable that the big boys then collude on prices and sometimes 
agree to carve up the available market. These and other similar practices 
usually result in super-monopoly prices and super-monopoly profits.

If the ACCC is concerned that a proposed merger or joint venture would be 
likely to result in a substantial lessening of competition in the market, 
then it can oppose that venture.

For example, earlier this month the ACCC opposed a joint venture between 
Farm Pride Foods and Pace Farms Pty Ltd in relation to their egg product 
business.

The ACCC was concerned that the proposed joint venture would account for 
over half of the egg market. In the ACCC's view neither imports nor 
existing competitors would provide sufficient competitive restraint on the 
joint venture.

By and large the ACCC has not prevented the growing monopolisation of 
industries by a handful of big corporations, but it certainly plays a role 
in making that process more difficult on some occasions.

Despite this, the BCA in its submission to the Dawson Review came out 
strongly against the power of the ACCC in regard to takeovers and mergers. 
Big business wants to manage its own affairs without any "interference" 
from third parties. It wants to do as it pleases.

The BCA proposed that companies be given the option of bypassing the ACCC 
for mergers and be able to go straight to the Australian Competition 
Tribunal. It wants a substantial lessening of the competition test in 
mergers and acquisitions.

The BCA argues that with globalisation, the ACCC should "allow Australian 
companies to achieve the scale and efficiencies necessary to compete both 
internationally and against international competitors in the domestic 
market".

This shift reflects the growing pressure from transnational corporations, 
where companies must keep getting bigger and bigger for survival.

The BCA wants a provision saying that "an acquisition is not prohibited if 
the public benefits (including efficiency gains) of the acquisition would, 
or are likely to, outweigh any public detriment arising or likely to arise 
from the substantial lessening of competition".

Their theory is that allowing such monopolies to be formed in the name of 
greater efficiency (e.g. economies of scale) would result in lower prices 
for consumers. But the reality is that monopolisation puts smaller 
companies (potential competitors) out of business and paves the way for 
higher monopoly prices.

The CEOs of the big corporations know this but their objective is maximum 
profit derived from higher prices, not the interests of consumers or 
smaller companies.

The aim of the BCA is to weaken the Trades Practices Act's already 
inadequate restrictions on mergers and takeovers.

The squabble with the ACCC highlights several of the conflicts of interest 
between different sections of capital. For example, some industries want 
lower phone charges and think that an increased number of competitors with 
Telstra will achieve this.

However, the big corporations that have moved into the Australian 
telecommunications industry strive for monopoly control.

Another example is the never-ending conflict between "free" traders and 
"protectionists".

It will be interesting to see how far or fast the Howard Government is 
prepared to go in removing the remaining restrictions on big business, 
especially in the present business climate in which there is an increased 
demand for re-regulation following the big corporate collapses.