Australia’s economy needs a shake-up to ensure “cosy monopolists” don’t dominate the market, with the new minister for competition, Andrew Leigh, pledging to legislate tough new penalties of up to $50m for anti-competitive behaviour.
With stagnant wages growth and high inflation identified as key priorities for the new Albanese government, Leigh says preventing “excessive market concentration” will be a key focus of his role to encourage more competition to the benefit of both workers and consumers.
“One of my favourite barbecue games is let’s go through the Australian economy and name more than a handful of industries where there is more than just a couple of dominant players. Whether it’s banking or baby food or beer, the Australian economy is characterised by a few firms dominating the market,” Leigh told Guardian Australia in his new role as assistant minister for competition, charities and treasury.
According to a study undertaken by Leigh and fellow economist Adam Triggs last year, in more than a fifth of Australia’s industries, the two biggest firms control at least half the market.
Leigh said Australia had felt the effect of rampant mergers across the economy, with a sixfold increase in mergers since 1989.
“What economics tells you is that you will get lower prices if you have more competitive markets, so I think in every context, the competition regulator needs to be making sure that it’s doing all it can to get more players into the market and particularly avoiding those situations where you’ve got a single monopolist, or a monopoly or a duopoly that are divvying up the market,” he said.
“If we want to get more R&D [research and development], we want to get more productivity, we want to get more growth, we want to get higher living standards, then we’ve got to do something about excessive market concentration.”
Under proposed changes to competition law being advanced by Leigh, penalties for companies that engage in anti-competitive behaviour will be lifted from $10m to $50m. The move will raise $557m over the next four years.
Leigh said that raising penalties would ensure the fines constituted “a real commercial deterrent” for companies.
“It’s important that penalties be not just the cost of doing business, not just a slap on the wrist, but a really substantial deterrent,” Leigh said. “I think our penalties have been too low for too long.”
He also said he was open to considering changes to merger law reform – something that the Australian Competition and Consumer Commission has said needs an overhaul.
“I think government should always be vigilant to the possibility that merger laws can be tweaked, but at the same time we don’t want to miss out on the opportunities for getting new startups.
“It’s important to have that competitive pressure, because often that’s what drives firms to innovate. If you’re a cosy monopolist, you’ve got no incentive to try new things and to experiment with better ways of boosting productivity.
“If you’re in a dynamic, competitive market, then firms are more likely to be testing themselves to their limits, and of course that flows through to workers too.”
Leigh has flagged his other legislative priorities include introducing a “super complaint” function within the ACCC, and making unfair contract terms illegal.
The super complaint function would allow trusted consumer groups, such as Choice, and business sector advocates to advise the ACCC on serious complaints of corporate behaviour that was hurting Australian consumers.
“It might be somebody who’s operating a whole lot of financial counselling helplines, for example, who notices a particular pattern of predatory behaviour and is able to say to the ACCC, ‘you should look into this … don’t just treat this like any other complaint, treat it like a super complaint because we’re only bringing it to you because we’ve noticed a pattern’,” Leigh said, citing examples such as payday loans and funeral insurance where there had been a large number of complaints.
Leigh said he was hopeful that a fresh focus on competition policy, as was also occurring in the US under the Biden administration, would deliver a new era of competition that would see startups flourish and consumers and workers benefit.
He pointed to the productivity gains made following the Hilmer report on competition policy that was commission by the Keating government in the early 1990s as a guide for the new Albanese government to follow.
“Both competition and productivity are kind of seen as soporific words, but they’re at the heart of Australia getting to enjoy the sort of prosperity which lets us live longer lives, healthier lives, to be more generous to disadvantaged Australians and to the region,” Leigh said.
“So much of Australia’s prosperity has been driven by productivity and so much of the productivity growth has been driven by making sure that markets are competitive.”
