The outgoing head of the competition watchdog, Rod Sims, says business is being unfairly scapegoated by politicians over price rises which are being driven by factors beyond Australia’s control.
Mr Sims, who finishes after a decade as chairman of the Australian Competition and Consumer Commission on Friday, used his final interview to push for major reform including tougher merger laws, saying changes to the competition, tax and industrial relations system needed to be debated after the federal election.
But the outgoing regulator, who has made a name fighting business on many occasions, went into bat for companies ahead of his last day, warning that a “pile on” over price rises by politicians was misleading the public. Treasurer Josh Frydenberg warned businesses this week against forcing through opportunistic price hikes.
“We’ve got price rises, we’ve got labour market issues and people wanting higher wages, Mr Sims told The Australian Financial Review.
”You’ve got the situation in Ukraine affecting petrol prices, logistic problems, the floods, we still have the impact of COVID-19.
There’s an obvious range of reasons why you have price raises and people trying to find a business scapegoat is giving the public the wrong understanding.”
Food inflation is predicted to hit 6.8 per cent through this year. SPC chief executive Robert Giles wrote to supermarkets last week advising his intention to increase the price of around 100 household staples including SPC baked beans and spaghetti.
The national weekly average petrol price also increased from $1.83 to a record $1.97 last week, according to the Institute of Petroleum.
“There’s no doubt that in the petrol market this is 100 per cent due to international factors beyond Australia’s control,” Mr Sims said. “It’s focusing the public’s mind on business behaving badly when that is not what we are seeing here.”
“With all these explanations I think focusing on companies is putting the public’s attention on the wrong issue. The reason we’ve got price increases, overwhelming, is due to factors beyond Australia’s control.”
But Mr Sims said he hoped one of his lasting legacies would be starting a debate on the need for major reform, which had “necessarily been on hold because of the all-consuming nature of the pandemic”. That would change once the election was decided.
“When the pandemic started and business said ‘here is an opportunity for tax and IR reform’, my gut reaction was ‘forget it’, we’ve got a pandemic to fight,” he said. “After the election, whoever wins, is the time to focus on those issues.”
Reform takes time
Mr Sims, who worked for the late Bob Hawke, including as his senior economic adviser through major reforms of the late 1980s, said advocating for change was a long-term proposition and those claiming it was too hard were wrong.
”What is wrong is commentators saying ‘someone threw an idea out there, it didn’t go anywhere, therefore the reform agenda is dead’. That’s why you need advocacy for reform. People have got to see why it’s important,” he said.
“Once you put the idea out there that’s the ‘game beginning’. Deal with the arguments, engage, debate and advocate.
“If you want to undertake significant economic reform, you have to till the soil, you’ve got to make the case. It takes a lot of time.
“All the big reforms took a lot of argument, a lot of preparation, a lot of facts and evidence to support what you are doing. It’s one thing to come up with the ideas but most of the effort [during the ’80s and ’90s] went into gaining acceptance and implementation.”
Merger law changes
He fiercely rejected the idea that the Morrison government had ruled out the possibility of change on merger laws.
“I know for a fact they haven’t,” he said. “What Josh Frydenberg said was not wanting to increase the burden on business at this time.”
Mr Sims, who will be succeeded by competition lawyer Gina Cass-Gottlieb, pointed to four areas of competition reform he would like to see completed, topped by the need for a mandatory notification system and tougher bar for mergers.
“Under the competition heading, the most important thing is the merger law changes because if the economy is too concentrated, it just doesn’t run properly and we all lose, companies, consumers, everybody loses.“
The proposed changes, which would represent the biggest shake-up of competition law in 30 years, come after seven straight court losses by the ACCC including its high-profile failure to stop the TPG-Vodafone merger under the current regime and in the midst of an M&A boom as the pandemic eases.
Damage to the economy
Mr Sims suggested there could be a “fairly high threshold” for a mandatory notification system and said “it would only have some impact on those really complex mergers, but when two or three of those get through a year that shouldn’t, then a lot of damage is done to the economy”.
“Every other country in the world has mandatory notification of mergers. There are basically no approvals; that’s the problem,” he said.
The ACCC chairman – who put the issue on the agenda during a Law Council speech last year – said the other aspect of merger laws he believed needed to change was that “if it is established you have substantial market power that you cannot undertake a merger that significantly increases that market power”.
“It is bringing some element of industry structure into the equation, at the moment the courts don’t pay any attention to market structure, which is a real economic flaw,” Mr Sims said.
Extracted in full from: Rod Sims says business not to blame for price rises (afr.com)