The Albanese government has flagged a renewed regulatory crackdown on abuses of market power by multinationals, digital platforms and entrenched oligopolies, with assistant minister for competition, charities and treasury Andrew Leigh using a key speech to put regulators on notice.
Addressing the Australian Government Solicitor Civil Regulation Conference in Sydney on Wednesday, Leigh said “significant changes in the Australian economy” had prompted an increase in civil anti-competitive behaviour penalties, coupled with more reforms on the back of forthcoming reviews.
“The job-switching rate has fallen. The business start-up rate has declined. The largest firms have increased their market share. Mark-ups have increased. In my view, this all suggests that the Australian economy has become less competitive,” Leigh said.
“More work is needed to better understand if any policies can and should be used to boost competition and productivity growth.”
Leigh flagged two key pieces of work informing competition policy, namely the ACCC’s next release of its epic digital platforms inquiry report, due shortly and which the competition minister said “will likely recommend addressing some of the competition issues in this sector.”
He also cited the Productivity Commission’s five-yearly productivity review due next year, “which provides an opportunity to explore issues of declining market dynamism.”
The role of competition policy and its settings and influences are being closely watched by key business and stakeholder groups, including unions, because they will establish a new set of guard rails for corporate behaviour around both mergers and takeovers and wages.
With inflation now declared the key national economic enemy, Leigh’s comments around markups and market share indicate there will be a renewed focus on calling out price gouging and the retention of recent large price hikes despite falling costs.
While energy costs are forecast to remain elevated, there is known concern around how the biggest merchants, like major supermarkets, are using recently elevated prices to bed-in increased margins and thug over their supply chains.
A particular focus for Leigh was the role unfair contracts play in locking in inequity and shutting out competitive pressure.
“Higher penalties will promote greater competition and better corporate behaviour,” Leigh said.
“In September, I introduced the Treasury Laws Amendment (More Competition, Better Prices) Bill 2022 to Parliament. The Bill increases maximum competition and consumer penalties from $10 million to $50 million.
“It also increases the turnover-based penalty. It goes from 10 per cent of annual turnover to 30 per cent of turnover for the period the breach took place.”
Continuing the application of the stick rather than the carrot, Leigh said “existing laws haven’t stopped the use of unfair terms.”
“Smaller companies often lack the resources and bargaining power to negotiate terms in standard form contracts,” he said. “Stronger deterrence is also critical to protect against unfair contract terms.
Citing the hypothetical of “a big cleaning firm” with a thousand small business customers, Leigh said big firms write terms into standard contracts that allow increased prices.
But the same contracts contained terms that meant if small businesses “don’t like the price rises, they have to pay huge penalties to cancel the contract.”
“That’s why the government will outlaw unfair contract terms. If companies put unfair terms in their contracts and a court finds they are unfair, then they can expect to cop a penalty,” Leigh said.
The toughened penalty regime would protect more small businesses by increasing the eligibility threshold from less than 20 employees to less than 100 employees.
“We’re also introducing an annual turnover threshold of less than $10 million as an alternative test for determining eligibility,” Leigh said.
“The bill has now passed both houses of parliament, and I am looking forward to it soon becoming law.”
In other words, time for regulators to get cracking.
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‘What gets measured gets managed’: Leigh underscores role of ABS in future policymaking
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