An agenda to boost Australia’s economic prosperity and fairness

Speakers: 
Mr Rod Sims, Chair
Conference: 
National Press Club
23 February 2022

ACCC Chair Rod Sims addressed the National Press Club in Canberra reflecting on achievements of his time at the agency and challenges for the future.

Transcript: 

Check against delivery.

Introduction

Thank you for the honour of speaking to you again today at this great venue. Over my nearly 11 years at the ACCC I have enjoyed and benefitted from my interaction with the media, and I thank you for that. You often gave me valuable new perspectives on issues.

I came to the ACCC believing that the media seeks to work in the interests of Australia, and my view on this point has only strengthened over the last 11 years.

For me, it has been a fascinating and I hope productive time at the ACCC, another institution that works hard in the interest of Australia. While I will indulge in outlining some of the things I look back on with pride, I will spend most of my time today on some issues and challenges ahead, which I am sure is of much more interest to you.

When I arrived at the ACCC I mentioned my main objective in chairing the ACCC was “… that Australians see that a market economy and strong competition works for them and that they see the ACCC working tirelessly for the long run interests of consumers”.

We must recognise that a market-based economy is fragile as its organising principle relies on companies and businesspeople pursuing their own self-interest. This is not an obvious way to organise things. For this to work to the benefit of all Australians requires at a minimum strong competition between firms and strong enforcement of the CCA.

In our society large established businesses have a strong voice, which is not surprising as the largest firms employ many people and supply Australians with many of their needs. Often, however, the understandable interest of large established businesses in short term advantage sees them, I believe, work to the disadvantage of their own long-term interests.

Large established businesses have opposed all the main changes to the CCA when they were introduced. They opposed, for example, laws against misleading and deceptive conduct. I would ask, however, how many specific interventions and extra red tape would we now have that would damage our market economy if we did not have this general provision?

The CCA largely has economy-wide laws whose effectiveness underpins the necessary wide acceptance of a market economy. Perceptions of unfairness and inequality will see faith in a market economy eroded.

The vast bulk of the population always wants regulators to do more, including the ACCC, while large established businesses and sometimes governments think our role should be reduced. An occasional criticism of the ACCC can be that it is “toothless”. This charge is levelled at all regulators at some point but for the ACCC in part this is based on the misunderstanding that charging excessive prices, or price gouging, is against the law when, except in exceptional circumstances, it is not.

I will mention later the need for changes to our merger and consumer laws. Large established businesses and their advisers will oppose these changes, but my guess is that well over 90 per cent of Australians would support them. Further, I think such changes would strengthen our market economy, and would benefit the vast majority of Australian businesses.

I will now reflect a little on my near 11 years as ACCC Chair and will then discuss some issues and challenges.

Doing what I said I would do

In my first speech as Chair of the ACCC, in August 2011, I said that close to a 100 per cent success rate in court which the ACCC then had indicated that we needed to take on more cases where the outcome is less certain, and we have done that. I said I wanted to make full use of the new consumer law provisions, and we have also done that. I also said we needed to advocate and contribute more broadly to debates where we have a useful voice to add, and we have done that.

I also think the ACCC is now a more sophisticated agency, we have improved our enforcement model, we are a recognised world leader in consumer enforcement and product safety as well as on digital platform issues, we are now more often seen as the competition champion in Australia, and we have strong staff commitment to the agency and its objectives.

I will elaborate briefly.

First, our consumer enforcement record includes creative wins against companies such as Trivago (where we unpicked its algorithm) and Google, and we have seen penalties imposed by the courts for breaches of the CCA increase from $1m being seen as high to recent penalties of $50m against Telstra, $125m against VW and $153m against AIPE, a vocational education provider, all in 2021.

I should add that the ACCC’s Scamwatch website was recently recognised with the “Scam Fighter of the Year” award for 2022 by the Global Anti-Scam Alliance.

Second, we have 11 competition cases currently in court, and some important competition cases which will unfold very soon. We have a good win/loss record, including recent guilty pleas in cartel cases, including by individuals in two criminal cases. I recognise, however, that we have had some losses, including in a recent high-profile case. We will reflect on these outcomes, but losses are to be expected when you are a strong enforcer of the law.

We successfully campaigned for a significant change to section 46, against a strong lobbying effort by large established businesses, and we won our first section 46 case in a long while as a result. Changing Section 46 has improved business behaviour as there is no longer the free pass to anti-competitive behaviour that existed before the law was changed.

Third, we have done world-leading work on digital platforms, shining a light on the way these platforms work for consumers and for business especially in relation to AdTech, search and apps. We conceived of and then worked closely with the Government and Treasury to implement the News Media Bargaining Code which has seen over $200m per year injected into nearly all media organisations, large and small.

Fourth, we have changed the debate on privatising unregulated monopolies which see huge amounts raised from privatisations which end up costing consumers and user’s huge sums over the long term, and we have seen new arrangements for regulating other monopolies.

Fifth, we have successfully conducted numerous market studies which, in my view, have seen marked improvements in the electricity, gas, financial and agriculture sectors.

Sixth, we have successfully implemented and nurtured the new Consumer Data Right regime, which will increasingly bring huge benefits to Australians.

Seventh, we have done some amazing work in product safety, such as a 99.9% recall of Takata airbags and a world-first safety standard for button batteries.

Eighth, we have introduced a monitoring programme so that people know the download speeds they are getting on the NBN, we have improved the information to consumers about the speeds they should expect generally, and we have commenced a detailed process to reset the regulatory rules facing the NBN.

Ninth, our collaboration with our international counterparts is at an all-time high, particularly on competition cases, as shown by our recent Five Eyes agreement to look at international collusion in freight logistic chains.

We are widely applauded within the Asian region for our support to the younger agencies in our region on both competition and consumer law design and enforcement. The thanks I get whenever I meet my regional agency heads fills me with pride for the work the ACCC is doing. Our standing in our region has never been higher.

Tenth, and finally, we have 88% of ACCC employees seeing the ACCC as a good place to work versus an APS-wide figure of 68%.

Ten is a nice round number, but I have left much out, to the relief of you all. And in many of these areas there are challenges and issues ahead, to which I will now turn.

Issues and Challenges ahead

The issues and challenges I will now outline create a great microeconomic reform agenda that would improve productivity and the prosperity of all Australians. Such an agenda is clearly needed. While the pandemic must continue to dominate the agenda, hopefully for us all this will fade at some point.

Again, I will confine myself to ten areas.

Australian consumer law

Australia has in recent years made great strides in its recognition of the importance of consumer law.

It may surprise you to know, however, that the following are not generally unlawful:

  • selling unsafe goods
  • not honouring consumer guarantees, provided you do not tell the affected consumer that they have no such right
  • putting terms into standard form contracts that, for example, allow the large company seller to unilaterally increase the price you must pay during the contract, and
  • large companies abusing their position of strength by treating their customers unfairly; for example, health insurers raising the effective prices patients pay for repeat hospital services without telling the affected patients who only find out they have a large bill to pay after their next hospital visit.

I could go on, but you get the gist.

There are law change proposals at various stages of consideration to address these issues, such as including both a general safety provision and an unfair practices provision in the CCA, but progress is slow and large established business resistance is often strong and effective.

I believe these law change proposals would make our market economy work better and would avoid the need for more specific and intrusive legislation.

Competition law enforcement

There is a school of thought that commerce in a market economy is a no-holds-barred robust business, and that competition law should only rarely interfere in this. While there is some merit in this, we do not want our competition laws to become a protection racket for those who already have significant market power and seek to enhance and use it.

Business argues we should always bias against “false negatives”; that is, against taking enforcement cases against activity that would ultimately not have damaged competition. I would argue the opposite; we should ensure there are very few “false positives”, as the costs to our community of anti-competitive activity are by far the larger problem.

Competition cases in Australia are hard to win, as shown in a recent case involving alleged barriers to the Port of Newcastle competing with Port Botany, a case which is currently on appeal to the Full Federal Court. At some stage our competition laws may need re-examination to ensure they are effective at protecting competition in Australia.

Some current and impending future cases will give us valuable insights into the need for this.

My views on the need for merger law reform are well known. Australia is almost unique in not having a formal merger approval system. Further, the ACCC must prove, if a matter goes to court, that future negative consequences will occur, which can only be speculated on, against the so-called real-world evidence of the necessarily self-interested merger parties about what will happen in the future.

In addition to a formal merger approval regime, we are also proposing that firms which already have substantial market power should not be able to acquire if that would significantly increase their market power or extend or entrench it.

In my view, and the view of many others, the Australian economy suffers from high levels of market concentration to the detriment of consumers, small business and productivity. The most important tool to prevent this is our merger laws and they are not up to the task.

Australia is currently facing supply and logistic challenges. I think these are made worse by our market concentration in so many areas and by our infrastructure bottlenecks. We need to address this through competition law, to prevent anti-competitive abuses of market power, and through general infrastructure reform. The former will need the ACCC to take cases, which it will continue to do, but it may need further law reform. I will now turn to the latter.

Infrastructure

Australia has high-cost infrastructure generally. While, as I have said today, the debate has turned a bit, why do we keep privatising assets and claiming success when huge amounts are paid for the asset? Often, these huge prices are the result of closing off competition, or because a monopoly was deliberately sold without any regulation of the prices that can be set for users who have no alternative but to use the monopoly asset.

In Australia, almost uniquely, we seem to focus on how much we can sell infrastructure assets for, rather than having our infrastructure benefit our wider economy.

Such behaviour can dramatically affect existing users and could be considered a continuing tax on the community.

Perhaps the most recent example is State governments creating a monopoly in electronic property conveyancing that is now called Pexa, and then selling it. The way Pexa now operates, as that existing monopoly, makes life very hard for would be competitors.

I believe all government’s need to sign up to a checklist before infrastructure assets are sold to avoid provisions which restrict competition and to ensure there is appropriate regulation where monopoly or significant market power will exist post sale.

Let’s acknowledge this issue and fix it so that Australia can avoid even higher priced infrastructure in future.

Another important infrastructure challenge we have is redoing the regulatory arrangements for the NBN. After spending $50bn on the NBN the objective must not be a commercial return on the sunk investment. It must be making the best use of this great asset.

The prices that allow the NBN to get a commercial return on all its outlays, and the prices that make best use of this expensive asset, are very likely quite different.

We all saw the benefit of having the NBN completed in time for the pandemic lockdowns. That is just a taste of the benefits if we get NBN pricing right. Prices must allow NBN to keep investing as needed but must also see optimum use made of it.

Energy

Our electricity and gas markets are in a mess for a wide range of reasons. I devoted an entire National Press Club speech to these issues some years back.

I will now make a simple point.

Most of the world has accepted that there is a negative externality associated with carbon. With Australia having decided not to deal with this issue via a market-based mechanism, we are left with a challenge of how we achieve affordability, sustainability and reliability, without seriously trading off one of these objectives to achieve another. Almost all the voices in energy policy appear to place emphasis on one of these objectives, and too little on at least one other.

We must, however, seek to achieve all three objectives.

Australia is so very well placed to do so given our abundance of all sorts of energy resources and minerals. We must find a way to bring the strongly competing voices together to focus on all three objectives. Otherwise, Australia will miss a great opportunity.

Digital Platforms

I am proud that the ACCC is at the forefront of world efforts to identify the harms from digital platforms and potential solutions to them. We have an internet dominated by a few gatekeeper companies. Google has 95% of search, Facebook dominates social media and Google and Apple dominate the app market particularly on mobile devices.

While they innovated their way to success, they also acquired a huge array of companies that have extended their reach and cemented their power. They also engage in many activities, from product bundling to self-preferencing their own products and services, that have lessened competition in various important digital markets over time.

They also have access to and control a massive amount of our data which has seen harms ranging from that seen with Cambridge Analytica, to profiling people to maximise sales by exploiting consumer vulnerabilities.

Action is needed and the ACCC will, early next week, release a Discussion Paper outlining a range of options for comment. Such options would impose up-front rules that would prevent the worst abuses of dominance and protect consumers.

Australia has already led the world with the News Media Bargaining Code that dealt with one issue very effectively, which is the lack of bargaining power of media companies when dealing with digital platforms resulting in underpayment for news content.

There are so many other issues and action will occur internationally with Australia so very well placed to continue to be at the forefront. If we are, we can help shape a sustainable internet to the benefit of Australians and Australian businesses.

Financial Services

There are so many challenges in financial services. I will mention only three.

First, the price of the most important financial product, a home mortgage, is unknowable without huge effort and cost, which benefits banks and harms borrowers. The Consumer Data Right will help a lot. The ACCC has also recommended that consumers be continually informed by a “prompt” of what typical borrowers are paying so that they know when they need to seek a lower interest rate or change their bank.

Second, to help address issues associated with debanking, we have recommended a scheme to enable fintechs or money remitters to show banks that they have adequate systems and controls in place to manage risks associated with money laundering. If they can show their systems are up to scratch and are then debanked the ACCC will have much more clarity about whether anti-competitive conduct may be occurring.

Third, there is the role of the digital platforms in our now largely cashless world. Is, for example, Apple engaging in anti-competitive conduct by insisting that all payments using its smart phone are via Apple Pay and restricting access to its Near Field Technology (NFC) so that others cannot provide full services via their own digital wallets?

Agriculture

Since joining the ACCC I have been surprised at how little influence on policy Australian farmers have. Large corporate farmers do OK, but processers and intermediaries appear to have much more sway over policy.

Typical Australian farmers have no say on the prices that the concentrated downstream buyers pay them, and then usually face the risk of a downward adjustment in international prices which they are worst placed to manage.

I am proud to say that the ACCC has had some success in addressing bargaining power imbalances in the dairy sector through the introduction of the Dairy Code and has made recommendations to help farmers from grape growers to beef producers, with albeit only limited success so far in seeing these implemented. We have, however, also seen a wide array of unfair contract terms removed and helped shorten the outrageous payment times for grape producers.

Our Perishable Goods Inquiry recommended an Unfair Practices Provision be inserted into the Australian Consumer Law to help farmers avoid the worst of practices, such as product buyers seeking to pay lower prices once they have the produce delivered knowing that the product will spoil if it is then diverted to another buyer.

An Unfair Practices Provision would greatly help restore farmer faith in our market economy and, I believe, make them more productive.

Another issue is the urgent need to reform to the Murray Darling Basin water trading system.

It is vitally important for east coast agriculture, but currently operates with poor market mechanisms and few constraints on poor behaviour.

I am delighted that our Murray Darling Basin Inquiry (MDBI) report is being taken very seriously by the Government with a well-constituted group set up to implement its recommendations.

Small business

Small business is another group whose voice is often insufficiently heard. They suffer badly from unfair contract terms in standard form contracts, and from a range of unfair practices that an Unfair Practices Provision would prevent.

Small businesses can face contracts for essential inputs which mean prices can be unilaterally increased mid contract, or which see automatic contract extensions coupled with punitive termination provisions.

Small businesses can also face arbitrary algorithm changes that can destroy their business, and platforms with no products to supply entering their market to attract their customers whom they charge large commissions to purely for being usually an unnecessary intermediary.

I could go on and on. Of course, some small businesses want protection from competition, but often they are simply after a level playing field on which they can compete. Not addressing the latter reinforces cries for the former, which is not helpful.

Changes to the CCA would, I think, make Australia’s small businesses more productive.

Consumer Data Right (CDR)

The Productivity Commission had the insight to recommend this crucial reform, and the ACCC was in essence charged with getting it off the ground, which I am proud to say we successfully did. We continue to have a key role in its continuing implementation, but the Treasury is now in the policy lead.

I would urge you all not to underestimate the benefits that can flow from the CDR. As the most basic example, a consumer can tell their bank to send their mortgage history to another bank to get an immediate competing quote without weeks of form filling and bureaucracy.

Just like the roll out of the NBN, the initial launch has inevitably taken time to get off the runway, but it will soon be flying in financial services and many other sectors.

It is important to note that the CDR comes with its own inbuilt privacy protections that are fundamental to consumer acceptance. Our general privacy laws were seen as insufficient protection when putting the CDR together, which is why it is terrific that the ACCC-recommended Privacy Act Review is currently underway.

It is vital that significant changes are made to the Privacy Act, and this is a crucial part of the agenda I am outlining today.

The CDR shows we can use data well and protect privacy if we want to. In my view we will only gain the great benefits possible from data if we improve our privacy laws.

Aviation

Our aviation sector has had a shocking time during the pandemic. Australia needs a competitive and affordable aviation sector more than just about any other country given our distances between where we live in this the most urbanised country in the world.

Despite this reality, however, the government removed the regulation from airports just as they privatised them so the sale proceeds could be maximised. There continues to be no price regulation of landing or other charges levied by the monopoly airports.

We have the prospect of more competition from Rex on city routes, and from Bonza who will target under-served routes. Whatever the chances of success for these attempts at greater competition it would be a tragedy if they failed because they could not get slots at our busiest city airports because all the key slots were kept by the incumbents who now need them less. Landing slots must not be used to lock in the current state of competition.

Of course, the ACCC will also be watching to see that Qantas and Virgin do not start flying new routes at a loss to damage the new entrants. Such predatory behaviour can damage competition and the Australian economy.

Conclusions

Right now, as I have said repeatedly, our governments must focus on the pandemic. Only once it settles can our economy function properly. I know we all hope that time comes soon.

When COVID is under control I am convinced that important and early movement on the above issues and challenges will do much to improve our economic prosperity and, possibly more important, to improve faith in our market economy.

Progress is underway on some issues, but there is much more to do.

I assure you all I am not retiring. I will have positions that will see me continue to advocate on many issues, both in Australia and internationally.

Thank you for your time today.