ACCC addressing market failure

29 November 2013

Address market failure and competition will unleash the incentives to win by best meeting the needs of consumers, Australian Competition and Consumer Commission Chairman Rod Sims said today.

In a speech to the RBB Economics Conference in Sydney, Mr Sims said the root and branch review of competition policy and law should be embraced.

“Improving incentives, particularly by removing impediments to competition, will boost productivity and national welfare.”

“I hope the review keeps the focus not just on competition, but also on broader incentives. Privatisation and congestion pricing, for example, are also measures that can greatly improve incentives,” Mr Sims said. 

Mr Sims discussed how each of the three tasks the ACCC performs enhances competition, and the close linkages between them.

“This can be clearly seen in our work on enforcing competition law; and our utility regulation role is aimed at maximising economic efficiency, mainly by promoting competition in upstream or downstream markets. Most of our consumer issues, however, also have an important competition dimension,” Mr Sims said. 

“For example, our work on credence claims, dealing with false claims as to where (Australia, King Island) or how (free range, or by a skilled artisan) a good is made is for two reasons. First, the consumer is not getting what they paid for; second, and often more important, genuine producers are losing out to those making the false claims.” 

The Chairman also reflected on the role of economic logic in competition cases. Some economists place a high burden on demonstrating that conduct will have an anti-competitive effect.

“If there is a strong economic theory of harm from the conduct and no credible alternative theory of economic benefit, then that may be sufficient to suspect that an anti-competitive effect is likely.  After all, if a firm or firms can profitably act to lessen competition they very likely will.”

Mr Sims also said some place too high a reliance on econometric techniques.

“In my experience econometric models can help test logic; they are never a substitute for it.”

The speech is available at

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