The first fruits of Labor’s competition taskforce, which was established last year, have emerged and confirm that Australia has a competition law problem.
In a speech today, Assistant Minister for Competition Andrew Leigh has revealed some early research produced by the new group within Treasury commissioned by Treasurer Jim Chalmers to advise on competition law reform.
Data developed in collaboration with the Reserve Bank and the Australian National University shows that the Australian Competition and Consumer Commission is missing the bulk of mergers, with 1,000-1,500 mergers on average occurring a year from the mid-2000s to 2018, but the ACCC considered an average of only 330 mergers each year.
That leaves a credibility gap of 60-70% of mergers untouched under current laws. The consultation paper issued by the taskforce has already proposed ways to ensure the ACCC vets more mergers.
While the level of ACCC-notified mergers has stayed relatively steady over the past 15 years, the data show there has been a consistent rise in the annual number of mergers since 2008, with 2018 being the highest year in a decade.
The frenzy of missed mergers might not be a problem if they were between small or medium companies, but the data shows just 1% of firms make half of all acquisitions. And that happens in consumer-facing sectors that are likely to have direct impacts on competition for Australians: retail, professional services, and health and social services, as well as manufacturing.
And the target firms are much more likely to have some form of intellectual property than average firms, suggesting very large firms are trying to buy innovation they can’t or won’t produce themselves.
The taskforce also has research that cuts directly across the government’s willingness to protect gouging monopolist Qantas from competition: having a competitor on an aviation route sees a marked fall in airfares for that route, and having two competitors sees airfares halved.
The data seems to suggest that all the fears of those who have been warning of declining competition are true: competition laws are too weak; the level of concentration in the Australian economy is growing; dominant firms are the ones doing the acquiring, and they’re trying to buy innovation, suggesting bigger firms are struggling to generate that themselves — with consequences for Australia’s level of productivity growth.
Genuine reform of competition laws and the power of the ACCC can’t come soon enough.
