Transcript
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Acknowledgement of country
I wish to acknowledge the Traditional Custodians of the land we are meeting on today, the Gadigal people of the Eora nation.
I pay my respects to them and their cultures and to their Elders past, present and emerging. I acknowledge their continuing connection to the land, sea and community.
I would also like to acknowledge and pay my respects to Aboriginal and Torres Strait Islander people who are attending today’s event.
Introduction
I’m delighted to be speaking to you today, at this summit for the third time as ACCC Chair.
A lot can change in a year. Australians are facing different economic pressures today compared to just 12 months ago.
My speaking here with you follows my announcement last month of our compliance and enforcement priorities for the year ahead.
As I noted at the time, the ACCC will be continuing to prioritise competition and consumer protection issues in the financial services sector along with other essential services, noting the significant impact of cost of living pressures across our community.
With that in mind, I want to particularly address you today about the heightened need to protect, assist and inform consumers in economically turbulent times.
Let me outline some of our recent work and thinking in this area.
Retail deposits Inquiry
One of the major pieces of work we have undertaken in the last year is our retail deposits inquiry, which concluded at the end of 2023.
Retail deposit products are essential to Australians’ everyday lives and their long-term financial security. They can also be an important source of income for many consumers.
In these times of increased interest rates, many consumers understandably want to make sure they are getting the best deal.
However, our Retail Deposits Inquiry found that challenges consumers face in searching for, comparing, and switching between products is causing consumer engagement with the market to be low.
We also found that competition for retail deposit customers is often selective and opaque.
While strategic pricing might make commercial sense for banks, it makes comparisons difficult for consumers.
For example, banks have in recent years, relied heavily on bonus interest rate and introductory interest rate offers. These offers may boost the headline interest rates consumers can receive, however the actual interest rates received by many consumers are lower.
In the first 6 months of 2023, we observed that, on average, 71% of consumers did not meet the bonus rate conditions in any month.
When customers do not meet these conditions, typically they revert to relatively low base interest rates.
For that time period, at one bank, this meant receiving an interest rate of 0.3% instead of the bonus headline rate of 5.25%. During that time period there was an unconditional saving account rate at the bank of 3.75% which would have delivered higher interest than the base interest rate of 0.30% on the conditional bonus interest account.
To deal with some of these issues, we made a series of recommendations for Government to consider.
Firstly, we think consumers should be alerted by their bank if they are about to breach bonus interest rate conditions.
We also recommended that banks should be required to tell consumers directly when they change interest rates, and prompt the account holder to consider whether alternative products may better suit their needs.
This should assist consumer engagement in these products as it has in other industries such as in the energy sector.
We also think it’s very important for customers to be able to compare the key features and pricing of retail deposit products.
However, we know it can be difficult for consumers to obtain an objective view of the best products due to lack of consistency between bank websites and conflicted commercial arrangements with comparison websites.
We have therefore recommended that comparison websites should be more transparent about any commercial arrangement they have with banks.
We also recommended further consideration of bank account portability which has the potential to greatly enhance the capacity for consumers to undertake switching between products and banks and drive competition.
With such crucial findings and recommendations coming out of our one year report, and given how crucial deposit rates are for many Australians, we consider continued monitoring is warranted.
Importance of continued monitoring of home loan and deposit markets
In 2020 the ACCC also conducted an Inquiry into home loan pricing and found similar issues relating to opaque pricing strategies.
These include the use of discretionary discounts offered on a case-by-case basis to individual customers, creating information asymmetry between lenders and borrowers.
Like the Retail Deposit Inquiry, in 2020 the Home Loan Price Inquiry also recommended a prompt to customers, in order to inform them of potential benefits in new loans and encouraging them to engage with the market. This may again be important for borrowers who are now facing high home loan rates as there may be later this year reductions in the cash rate set by the RBA and the potential for some reduction in rates for new home loans.
As with retail deposits, issues and frictions around switching were also prevalent in the home loans market.
This is why we recommended that lenders should be required to provide a standardised Discharge Authority form for borrowers to complete, and that it should take no more than 10 business days to complete the discharge process.
As the AFR reported last year, data from Lendi shows that the big four banks are still taking around 20 days to complete the discharge process.
This is an issue we are still very concerned about, as we are not seeing the kind of improvements that are necessary to safeguard competition.
A key recommendation from the Home Loan Price Inquiry was also the continuation of monitoring of competition and prices in the home loan market.
We think continued monitoring of both the home loan and the retail deposits market will act as a key tool for observing the impact of any policy changes that we hope will arise from the recommendations of both these inquiries.
Consumer Data Right and its continuing role in improving consumer outcomes
As I speak about making it easier for consumers to switch between retail deposit and home loan products, it naturally brings me to talk about important work the ACCC is doing in the Consumer Data Right.
The CDR is and continues to be a fundamental innovation for the Australian economy, in particular the banking sector which was the first sector designated.
Many of you will be familiar that the CDR gives consumers the right to safely access data about them, held by data holders, and direct this information to be transferred to an authorised third party.
This has the potential to help consumers access new products and services, including better deals on a range of banking and financial products.
We are happy to say that the CDR has grown significantly in the past year.
As of 14 March 2024, apart from data holders representing over 99% of household deposits in banking and over 85% of small customers in the National Electricity Market, there are also 40 accredited data recipients alongside 128 CDR representative arrangements currently on-going.
We are pleased to see consumers using the CDR for various use cases, including to assess their financial position in the context of mortgage applications, personal loans and personal financial management, among other financial services.
However, as CDR continues to expand and consumer uptake grows, the impact of data quality issues and addressing them swiftly becomes increasingly important.
Importance of continued enforcement work across financial services competition and CDR
For the CDR to be effective, it is critical that CDR data is of high quality.
This means that product and consumer data disclosed by data holders, such as banks, through CDR must be accurate, up-to-date, complete, and in the required format.
All data holders are reminded that failure to comply with the CDR rules will result in scrutiny by the ACCC and may lead to enforcement action, with potentially serious consequences.
Insufficient data quality continues to be one of our priority conduct areas, and we have several investigations currently on foot in this area.
We also take our responsibilities in enforcing the CDR rules very seriously and we will not hesitate to take action, as we already have had to do a few times in relation to data holder obligations.
We have also denied accreditation to aspiring data recipients who did not meet the stringent criteria of entering the CDR ecosystem.
Outside our CDR enforcement work, we also continue to be monitoring closely alleged breaches of our competition laws by financial services companies. Vigorous competition in essential services like financial services is critical to the efficient functioning of the economy as a whole.
We are continuing to prepare for trial in our case against Mastercard which is set down for March 2025.
In this case we allege that Mastercard offered large merchants discounts for processing credit card transactions which were conditional on processing all or most of their debit card transactions through Mastercard. We allege that, this had the purpose of substantially lessening competition in the supply of debit card acceptance services by deterring businesses from using the only alternative network, eftpos, even where it was the least cost.
Businesses across the banking and financial sector should be mindful that the ACCC will not hesitate to take action where necessary to protect competition including through court action.
Cash in transit
I also want to speak today about cash-in-transit services and the much publicised issues surrounding this industry.
We know that cash-in-transit services are crucial to maintaining access to cash to consumers and businesses across the economy.
In June last year, the ACCC authorised Armaguard and Prosegur, the two major cash in transit providers in Australia, to merge, subject to a court-enforceable undertaking.
In making this decision, we noted that the cash-in-transit industry is in structural decline due to the decreasing use of cash.
A few months after, the Australian Banking Association lodged an application to the ACCC for authorisation to enable the ABA, its member banks, and other industry participants to discuss and develop arrangements to facilitate ongoing access to cash for consumers and businesses across the Australian economy.
The application was lodged in the context of concerns raised by Armaguard, that the industry is not sustainable in its current form.
On 6 December 2023 the ACCC granted interim authorisation, with reporting and transparency conditions to ensure that the ACCC is informed of the progress of discussions, including consultation with stakeholders.
We are aware that industry responses and solutions are being worked upon to ensure the ongoing availability of cash across all sectors of the economy, particularly in rural and remote areas where cash access is more limited, and the impacts of not having access to cash would be most pronounced.
The ACCC is open to considering any further exemptions viewed as necessary by the industry to ensure this vital service remains viable for the millions of Australians that use cash.
ANZ and Suncorp merger
Speaking of authorisations, I think its fair to say a few things have happened since I was last at this summit when it comes to ANZ’s proposed acquisition of Suncorp’s banking arm.
As many of you know, The Australian Competition Tribunal recently granted authorisation for the transaction to proceed, setting aside the ACCC’s earlier decision not to authorise the acquisition in August 2023.
It’s very clear in these areas of complex competition analysis that require the assessment of significant volumes of information and data, different decision makers can reasonably arrive at different conclusions. While in this case the Tribunal reached a different view to the ACCC, it identified some of the same concerns that the ACCC held but ultimately gave them different weight.
In a number of fundamental areas, however, the Tribunal did reach similar conclusions and shared many of the same concerns that the ACCC held.
Firstly, the Tribunal shared the ACCC’s concerns that the national home loans market has features which make it currently conducive to coordination – putting competition at risk.
These findings are made in a context where the major banks have, for many decades now, been the same four banks with dominant market shares.
Second, material barriers to entry and, in particular, expansion, remain in banking markets.
One of these barriers that both the ACCC and the Tribunal observed is that historically there has been a relatively low propensity for customer switching.
In relation to home loans this is particularly heightened for existing customers who form the ‘back book’ of loans. These customers typically pay closer to the standard variable rate of interest on their home loans, which in turn is a reflection of consumer inertia and switching costs.
Given the importance of banking markets to the Australian economy, the ACCC will continue to apply scrutiny to these markets across the breadth of our functions including merger assessments and enforcement investigations.
Merger reform and its importance to more competitive financial markets
Since last April the ACCC has put forward a proposal for merger reform advocating for a better merger regime for the benefit of competition across the economy and for consumers.
The Treasurer at the AFR Business Summit, noted that feedback to the Competition Taskforce indicated that the current merger rules may be too permissive, allowing some mergers that don’t deliver benefits but do increase concentration.
The ACCC’s proposed reforms would establish an administrative approval regime that is balanced and targeted. They would ensure non-contentious acquisitions, which account for the vast majority of mergers, can be dealt with quickly with minimal regulatory burden.
At the same time, the changes we want to see will ensure the small number of complex and contentious acquisitions that raise potential competition concerns can be carefully scrutinised via a structured, transparent, and timely process.
Such reforms are particularly important in the context of the current environment where there are concerns that competition intensity has weakened across many parts of the economy, and there is increasing market concentration and growing cost of living pressures.
As shown by research commissioned by Treasury’s Competition Review Taskforce, an estimated 1000-1500 mergers occur in Australia each year. However, only about 330 are notified to the ACCC under the existing voluntary merger regime.
Therefore, an important focus of the ACCC’s reforms is to ensure that the ACCC is notified of relevant mergers and has the necessary tools to prevent those that substantially lessen competition before they occur.
A key part of this is to make it clear that a substantial lessening of competition includes entrenching, materially increasing or materially extending a position of substantial market power.
A greater focus on the structural conditions for competition would beneficially focus the merger assessment on the enhancement of a dominant position of the acquirer in a market, not just on the magnitude of the incremental change arising from an individual acquisition.
The importance of this is highlighted by the Competition Taskforce’s merger data analysis which indicates that acquisitions in Australia are disproportionately made by very large firms.
That analysis shows that the largest 1 per cent of firms account for around half of all acquisitions, and the merger activity by large firms has increased over time.
Banks and scam prevention
Another area the ACCC is focused on is our work and collaboration through the National Anti-Scam Centre with partners across government, law enforcement, industry including banks and financial firms and consumer groups, in combating scams.
Together we collect and share scam data and intelligence, implement scam prevention and disruption initiatives and provide better awareness alerts and education resources to help consumers identify and avoid scams.
We have seen some early positive downward trends in scam losses over the last six months and we thank everyone in this room who has had a hand in helping stop everyday Australians from being scammed.
However, scams continue to affect too many Australians. In 2023, Scamwatch received over 300,000 scam reports, resulting in losses of close to $477 million.
Investment scams continue to result in the highest losses, recording close to $293 million.
With this in mind, the ACCC’s National Anti-Scam Centre has called for and welcomed the Government’s commitment to introduce mandatory and enforceable scam codes across the scams ecosystem.
We consider these will promote consistent measures across sectors to address scams and provide clear roles and responsibilities for government, regulators, and the private sector including banks, telecommunications and digital platforms.
Conclusion
The ACCC’s role and mission as Australia’s competition and consumer regulator is vital in the face of growing uncertainty for businesses and households.
There is a clear heightened need to protect, assist and inform consumers across the financial and banking sectors in economically turbulent times and the ACCC is working to ensure we can achieve this through our priorities and focus. Thank you.